THE REGISTRANT MEETS THE
CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b) OF FORM 10-K AND
HAS THEREFORE OMITTED CERTAIN ITEMS FROM THIS REPORT IN ACCORDANCE WITH THE
REDUCED DISCLOSURE FORMAT PERMITTED UNDER INSTRUCTION I.

Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes xNo o

Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Act. Yes oNo x

Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the past
90 days. Yes
xNo o

Indicate by a check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes oNo o

Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of the registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See definition of
large accelerated filer, accelerated filer and small reporting company
in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer x

Smaller reporting company o

Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yeso No x

American Express Company,
through a wholly-owned subsidiary, owns all of the outstanding common stock
of the registrant. Accordingly, there is no market for the registrants
common stock. At March 30, 2010, 1,504,938 shares were outstanding.

Documents
incorporated by reference: None

PART I*

Item 1.

BUSINESS

Introduction

American
Express Credit Corporation (Credco) was incorporated in Delaware in 1962 and
was acquired by American Express Company (American Express) in December 1965.
On January 1, 1983, Credco became a wholly-owned subsidiary of American
Express Travel Related Services Company, Inc. (TRS), a wholly-owned
subsidiary of American Express. Both American Express and TRS are bank
holding companies.

Credco is
engaged in the business of financing non-interest-bearing cardmember
receivables arising from the use of the American Express® Card,
the American Express® Gold Card, Platinum Card®,
Corporate Card and other American Express cards issued in the United States and
in certain countries outside the United States. Credco also finances certain
interest-bearing and discounted revolving loans generated by cardmember spending
on American Express credit cards issued in non-U.S. markets, although interest-bearing
and revolving loans are primarily funded by subsidiaries of TRS other than Credco.

American Express Card Business

American
Express is a global service company that provides customers with access to
products, insights and experiences that enrich lives and build business
success. American Express principal products and services are charge and
credit payment card products and travel-related services offered to consumers
and businesses around the world.

American
Express products and services are sold globally to diverse customer groups,
including consumers, small businesses, middle-market companies, and large
corporations. As a merchant processor, TRS accepts and processes from each
participating establishment the charges arising from cardmember purchases.
TRS charges a fee, the merchant discount, to the merchant that is
principally determined by the value that is delivered to the service
establishment and generally represents a premium over other card networks.
Value is delivered to the service establishment through higher spending
cardmembers relative to users of cards issued on competing card networks,
marketing expertise and the cardmembers insistence on using their cards when
enrolled in rewards or other card loyalty programs, including cardmembers who
are part of American Express Corporate Card program. When establishing the
discount rate, consideration is also given to a number of other factors, such
as industry specific requirements, estimated charge volume and payment terms.

The charge
card, which is marketed in the United States and many other countries and
carries no preset spending limit, is primarily designed as a method of
payment and not as a means of financing purchases of goods or services.
Charges are approved based on a variety of factors, including a cardmembers
current spending patterns, payment history, credit record and financial
resources. Charge cards generally require payment by the cardmember of the
full amount billed each month, and no finance charges are assessed on the
balance. Charge card accounts that are past due are subject, in most cases,
to a delinquency assessment and, if not brought to current status, may be
cancelled. The no preset-spending limit and pay-in-full nature of these
products attract high-spending cardmembers who want to use a charge card to
facilitate larger payments. In addition to charge cards, TRS and its
licensees also offer a variety of revolving credit cards marketed in the
United States and other countries. These cards have a range of payment terms,
grace periods, and rate and fee structures.

* Some of
the statements in this report constitute forward-looking statements. You can
identify forward-looking statements by words such as believe, expect,
anticipate, optimistic, intend, plan, aim, will, may, should,
could, would, likely, estimate, predict, potential, continue, or
other similar expressions. We discuss certain factors that affect our
business and operations and that may cause our actual results to differ
materially from these forward-looking statements under Item 1A. Risk
Factors and under Forward-looking Statements below. You are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date on which
they are made. We undertake no obligation to update publicly or revise any
forward-looking statements.

1

American
Express card businesses are subject to extensive regulations in the United
States, as well as in foreign jurisdictions. In the United States, the business
is subject to a number of federal laws and regulations, including:



the Equal
Credit Opportunity Act (which generally prohibits discrimination in the
granting and handling of credit);



the Fair
Credit Reporting Act (FCRA) as amended by the Fair and Accurate Credit
Transactions Act (FACT Act) (which, among other things, regulates use by
creditors of consumer credit reports and credit prescreening practices and
requires certain disclosures when an application for credit is rejected);



the Truth in
Lending Act (TILA) (which, among other things, requires extensive disclosure
of the terms upon which credit is granted), including the amendments to TILA
that were adopted through the enactment of the Fair Credit and Charge Card
Disclosure Act (which mandates certain disclosures on credit and charge card
applications);



the Fair
Credit Billing Act (which, among other things, regulates the manner in which
billing inquiries are handled and specifies certain billing requirements);



the
Electronic Funds Transfer Act (which regulates disclosures and settlement of
transactions for electronic funds transfers including those at ATMs);

Regulation Z
(which was recently amended by the Federal Reserve Board to extensively
revise the open end consumer disclosure requirements and to implement the
requirements of the CARD Act); and



Federal and
state laws and regulations that generally prohibit engaging in unfair and
deceptive business practices.

Certain
federal privacy-related laws and regulations govern the collection and use of
customer information by financial institutions. Federal legislation also
regulates abusive debt collection practices. In addition, a number of states,
the European Union and many foreign countries in which American Express
operates have significant consumer credit protection, disclosure and
privacy-related laws (in certain cases more stringent than the laws in the
United States). The bankruptcy and debtor relief laws affect Credco to the
extent that such laws result in amounts owed being classified as delinquent
and/or charged-off as uncollectible. Card issuers and card networks are subject
to certain provisions of the Bank Secrecy Act as amended by the USA Patriot Act
of 2001, with regard to maintaining effective anti-money laundering programs.

General Nature of Credcos Business

As noted
above, Credco engages in the business of financing the cardmember receivables
and loans of its affiliates. The use of a centralized funding source for assets
originated by affiliated entities is used by other large corporations like
American Express, providing operational efficiency in the form of a single
point of issuance to investors in the capital markets. Because its business
operations have the limited scope of providing funding to its card-issuing affiliates,
Credcos results remain separate from other sources of volatility and risk
inherent in the businesses of American Express and its other affiliates, making
credit evaluations by investors and rating agencies less complex. The
separation of Credco from American Express and its other affiliates also allows
American Express to provide Credco with financial support with respect to
maintenance of its minimum overall 1.25 fixed charge coverage ratio, which is
achieved by adjusting the discount rates on the purchases of receivables Credco
makes from, and the interest rates on the loans Credco provides to, TRS and
other American Express subsidiaries. Each monthly period, the discount and interest
rates are adjusted to generate income for Credco that is sufficient to maintain
its minimum fixed charge coverage ratio. Refer to Exhibit 12.1 for fixed charge
coverage ratio calculation.

In October
2008, as part of American Express strategy to increase its flexibility in
funding U.S. consumer and small business charge card receivables, Credco and
both American Express Centurion Bank (Centurion Bank) and American Express
Bank, FSB (FSB) (together, the Banks) mutually agreed to amend their respective
Receivables Agreements. The previous agreements called for the Banks, which
issue American Express U.S. consumer and small business charge cards, to sell
all unsecuritized receivables related to

2

spending on
those cards to Credco. The amended agreements will give the Banks the
flexibility, from time to time, to sell the receivables to Credco or to retain
the receivables and fund them from their own sources, which aligns with
American Express strategy to maintain access to a range of funding sources.
However, the amended agreements require the Banks to sell either all or none of
their charge card receivables to Credco at any given time. The Banks,
therefore, may not direct receivables with particular risk characteristics for
sale to Credco. The arrangements between Credco and the Banks have no impact on
Credcos funding of U.S. Corporate Card charge receivables and charge card
receivables outside the United States.

The amendments
to the Receivables Agreements have led to a material reduction of purchases of
cardmember receivables from the Banks. This reduction in volume has resulted in
a reduction in Credcos issuances in the debt capital markets and, in
particular, its reliance on short-term borrowings. However, a decline in
Credcos debt issuances, all else being equal, should not have an adverse affect
on Credcos performance and could serve to strengthen Credcos balance sheet
metrics, particularly the debt coverage ratio as the debt reduces and capital
levels become a larger portion of financing support. This could be beneficial
to Credco in the event the markets in which it traditionally borrows become
stressed as to pricing, liquidity, or both, as recently occurred in the period
from late 2007 through early 2009. The amended agreements could result in
increased volatility in the volume of Credcos purchases of receivables, and
thus its operating metrics that are volume-driven, including net income. Other
measures of profitability that Credco believes to be important to debt
investors, such as the fixed charge coverage ratio and margins, are generally
not materially impacted by a reduction in purchased receivables volume.

Under the
amended agreements, the Banks will decide whether to sell their charge card
receivables to Credco based primarily upon their consideration of the net cost
of funding through sale to Credco, maintenance of a consistently available
variety of funding sources, and the effect on the Banks required level of
capital from the decision to sell or not sell their charge card receivables.
The amended agreements require the Banks to either sell all or none of their
charge card receivables to Credco at any given time, and therefore the Banks
may not choose receivables with particular risk characteristics for sale to
Credco. As was the case under the original agreements, an overall decline in
the quality of receivables purchased from the Banks may result in a higher
total expense to Credco of purchasing the receivables. Credco includes its
expenses in the calculation of the discount rate at which Credco offers to
purchase receivables from the Banks and that discount rate is further adjusted
to maintain Credcos required minimum fixed charge coverage ratio of 1.25. Those
expenses include provision for losses, interest cost and any applicable service
fees. As a result, Credcos level of profitability relative to its assets
should not be materially negatively impacted by an increased cost of funds. For
additional discussion on the fixed charge coverage ratio, refer to page 33
below.

During any
period Credco is not purchasing the charge card receivables from the Banks, a
higher proportion of its business will be made up of the purchase of both
charge and credit card receivables from outside the United States and U.S.
Corporate Card charge receivables than if it had continued to purchase
receivables from the Banks. The credit quality of receivables from outside the
United States has been comparable to that of U.S. receivables.

Credco funds,
either directly or indirectly through its consolidated subsidiaries, cardmember
receivables and loans of its American Express affiliates primarily in one or
more of three ways:



purchases,
without recourse, of cardmember receivables and loans directly from the card
issuer;



unsecured
loans provided to affiliates, primarily other American Express bank subsidiaries;
and



loans
provided to affiliates that are collateralized by cardmember receivables and
loans.

Where Credco
purchases cardmember receivables and loans without recourse, amounts resulting
from unauthorized charges (for example, those made with a lost or stolen card)
are excluded from the definition of receivables and loans under the Receivables
Agreements and are not eligible for purchase by Credco. If the unauthorized
nature of the charge is discovered after purchase by Credco, the card issuer
repurchases the charge from Credco.

3

Credco
generally purchases non-interest and interest-bearing cardmember receivables at
face amount less a specified discount, which is determined at the time of
purchase based upon the nature of the receivables. The discount rate applicable
to purchases of new receivables is negotiated to reflect the changes in money
market interest rates and the collectibility of the
receivables. New groups of cardmember receivables are generally purchased net
of reserve balances.

Cardmember
loans are primarily funded by subsidiaries of TRS other than Credco, although
certain cardmember loans are purchased by Credco. These cardmember loans
consist of certain interest-bearing and discounted revolving loans generated by
cardmember spending on American Express credit cards issued in non-U.S.
markets.

As part of its receivables
funding activities, Credco regularly reviews funding sources and strategies in
international markets. Credco funds cardmember receivables and cardmember loans
in Canada primarily through loans to Amex Bank of Canada, the card issuer and
a wholly-owned subsidiary of TRS, rather than through the purchase of receivables
without recourse. In Australia and the United Kingdom, Credco funds cardmember
receivables and cardmember loans principally through transfers of receivables
with recourse from card issuers, which are wholly-owned subsidiaries of TRS.
These local funding strategies result in Credco recording additional loans
to affiliates. In Mexico, Credco funds cardmember receivables by acquiring
such receivables with recourse from American Express Company (Mexico) and
funds cardmember loans through loans to American Express Bank (Mexico), both
of which are wholly-owned subsidiaries of TRS.

In conjunction with TRS
securitization program, Credco, through its wholly-owned subsidiary, Credco
Receivables Corporation (CRC), purchased participation interests from American
Express Receivables Financing Corporation V LLC (RFC V), a wholly-owned subsidiary
of TRS which receives an undivided, pro rata interest in cardmember receivables
transferred to the American Express Issuance Trust (AEIT) by TRS. TRS and
its subsidiaries originated the receivables. AEIT is a non-qualifying special
purpose entity that is consolidated by RFC V.

A subsidiary
of TRS, as an agent for Credco, underwrites the cardmember receivables and
loans and thus establishes credit standards for cardmembers on Credcos behalf.
In addition, the subsidiary of TRS performs accounting, clerical and other
services necessary to bill and collect all cardmember receivables and loans
owned by Credco. The Receivables Agreements provide that, without prior written
notice to Credco, the credit standards used to determine whether a card is to
be issued to an applicant may not be materially reduced and the policy as to
the cancellation of cards for credit reasons may not be materially liberalized.

American
Express, as the parent of TRS, has agreed with Credco that it will take all
necessary steps to assure performance of certain TRS obligations under the
Receivables Agreements between TRS and Credco. The Receivables Agreements may
be terminated at any time by the parties thereto, generally upon little or no
notice. The obligations of Credco are not guaranteed under the Receivables
Agreements or otherwise by American Express or the Card Issuers.

Current
Economic Environment/Outlook

2009 was a
challenging year characterized by a weak economy, frozen credit markets in the
first half of the year and high credit losses industry-wide. In the first two
quarters, spending on American Express cards and cardmember loan balances
declined by double digits as compared to the corresponding periods in 2008 and
credit metrics (e.g., past due and write-off rates) peaked at historically high
levels. In the third quarter, American Express credit actions began to
positively impact past due and write-off rates and spending declines began to
become less severe. The fourth quarter showed greater improvement.

In the fourth quarter of 2009
the year-over-year growth rate in cardmember spending volumes was positive for
the first time since the third quarter of 2008, benefiting from both easier
comparisons to year-ago billings

4

as well as
higher levels of spending. Improvements in billed business trends were
experienced in all business lines in the fourth quarter. In addition, for the
first time during the year, the growth rate in both the number of card
transactions and average transaction size were positive in the fourth quarter
as compared to the corresponding period in 2008. Despite these favorable
trends, American Express expects the global economy to continue to recover
gradually and the resulting environment to be characterized by billings growth
that is more modest than it experienced before the recession as consumers and
businesses remain cautious about their spending. If this occurs, the impact on
Credco is likely to be a modest increase in purchases of cardmember receivables
and loans.

Volume of Business

The following
table shows substantially all cardmember receivables and cardmember loans purchased
by Credco during each of the years indicated, together with cardmember receivables
and cardmember loans owned by Credco at the end of such years (billions):

Volume of Gross
Receivables and Loans Purchased
For the Years Ended December 31,(a)

The reduction
in volumes of receivables and loans purchased during 2009 when compared to prior periods, is
primarily due to the amendment to the Receivables Agreements in October 2008,
and to a lesser extent, the reduction in purchases resulting from lower
cardmember spending in 2009 compared to the same period a year ago.

Cardmember Receivables and Cardmember Loans

As of December
31, 2009 and 2008, Credco owned $9.9 billion and $10.9 billion of cardmember
receivables, respectively. Cardmember receivables represent amounts due from
charge card customers and are recorded at the time they are purchased from the
seller. Included in cardmember receivables are CRCs purchases of the
participation interests from RFC V in conjunction with TRS securitization
program. As of December 31, 2009 and 2008, CRC owned approximately $2.9 billion
and $2.4 billion, respectively, of such participation interests.

Cardmember
receivables owned as of December 31, 2009, decreased approximately $966 million
from December 31, 2008, primarily as a result of a reduction of cardmember
receivables purchased due to the reductions in cardmember spending in the
current economic environment.

As of December
31, 2009 and 2008, Credco owned cardmember loans totaling $474 million and $498
million, respectively. These loans consist of certain interest-bearing
receivables comprised principally of American Express and American Express
joint venture credit card receivables.

5

The following
table summarizes selected information related to the cardmember receivables
portfolio for the years ended December 31:

(Millions,
except percentages)

2009

2008

2007

2006

2005

Total cardmember receivables

$

9,893

$

10,859

$

26,233

$

27,506

$

24,421

Loss reserves

$

141

$

204

$

831

$

739

$

671

Loss reserves as a % of receivables(a)

1.4

%

1.9

%

3.2

%

2.7

%

2.7

%

Average life of cardmember receivables (in days)(b)

29

33

34

32

32

Cardmember receivables subject to 180 day past due write-off policy(a)

In the fourth quarter of
2008, American Express revised the time period in which past due cardmember
receivables for its U.S. Card Services segment are written off to 180 days
past due, consistent with applicable bank regulatory guidance. Previously,
receivables were written off when 360 days past billing. A cardmember is
considered 360 days past billing if payment has not been received within 360
days of the cardmembers billing statement date. A cardmember account becomes
past due if payment is not received within 30 days after the billing
statement date. Credcos receivables subject to 180 day past due write-off
and the related net write-off rate, which reflects write-offs, net of
recoveries, expressed as a percentage of the average amount of cardmember
receivables owned by Credco at the beginning of the year and at the end of
each month in each of the years indicated, are reflected above, and includes
$257 million of net write-offs in 2008 as result of the methodology change.
See further discussion in Note 3 of the Consolidated Financial Statements.

(b)

Represents the average life
of cardmember receivables owned by Credco, based upon the ratio of the
average amount of both billed and unbilled receivables owned by Credco at the
end of each month, during the years indicated, to the volume of cardmember
receivables purchased by Credco.

(c)

Credcos write-offs, net of
recoveries, expressed as a percentage of the volume of cardmember receivables
purchased by Credco in each of the years indicated.

6

Reserves for Cardmember Receivables and
Cardmember Loans

The following
table presents the changes in the reserve for losses related to cardmember
receivables and loans:

Years
Ended December 31, (Millions)

2009

2008

2007

2006

2005

Reserve for
losses:

Balance at
beginning of year

$

218

$

841

$

749

$

686

$

610

Additions:

Provisions for losses

214

641

842

589

662

Other credits(b)

12

46

14

11

552

Deductions:

Accounts written-off, net(a) (c)

263

1,204

666

532

600

Other charges(d)

21

106

98

5

538

Balance at
end of year

$

160

$

218

$

841

$

749

$

686

Reserve for losses as a % of gross
cardmember receivables and loans owned at year-end

1.5

%

1.9

%

3.2

%

2.7

%

2.7

%

(a)

Includes recoveries on
accounts previously written-off of $75 million, $144 million, $175 million,
$158 million and $172 million in 2009, 2008, 2007, 2006 and 2005,
respectively.

(b)

Reserve balances applicable
to new groups of cardmember receivables and loans purchased from TRS and
certain of its subsidiaries and participation interests purchased from
affiliates. New groups of cardmember receivables and loans purchased totaled
$1.8 billion, $1.9 billion, $0.7 billion, $2.0 billion and $17.1 billion in
2009, 2008, 2007, 2006 and 2005, respectively.

(c)

The net write-offs for 2008
include approximately $257 million resulting from the 180 day write-off
methodology change discussed previously.

The components
of loans to affiliates as of December 31 were as follows:

(Millions)

2009

2008

TRS
Subsidiaries:

American Express Australia Limited

$

3,687

$

3,204

Amex Bank of Canada

2,728

2,257

American Express Services Europe Limited

2,710

2,388

American
Express Co. (Mexico) S.A. de C.V.

432

392

American
Express Bank (Mexico) S.A.

349

317

American Express International, Inc.

221

943

American Express Centurion Bank(a)



2,225

Total(b)

$

10,127

$

11,726

(a)

During 2008, Credco loaned
$2.2 billion to Centurion Bank as a consequence of the amendment to the
Receivables Agreements discussed previously, which was repaid in February
2009.

(b)

As of December 31, 2009, Credco had
$10.1 billion of outstanding loans to affiliates, of which approximately $6.8
billion are collateralized by the underlying cardmember receivables
transferred with recourse and the remaining $3.3 billion are uncollateralized
loans primarily with affiliated banks. As of December 31, 2008, Credco had
$11.7 billion of outstanding loans to affiliates, of which approximately $6.0
billion are collateralized by the underlying cardmember receivables
transferred with recourse and the remaining $5.7 billion are uncollateralized
loans primarily with affiliated banks.

Due from Affiliates

As of December 31, 2009 and 2008, amounts due from
affiliates were $4.9 billion and $3.7 billion, respectively. These amounts
relate primarily to a timing difference resulting from the purchase of
cardmember receivables net of remittances from TRS, as well as to operating
activities.

7

Short-term Debt to Affiliates

Components of short-term
debt to affiliates as of December 31 were as follows:

(Millions)

2009

2008

AE Exposure Management Ltd.

$

2,087

$

2,356

American Express(a)

948

3,579

American Express Holdings (Netherlands) C.V.

294

417

American Express Europe Limited

150

175

National Express Company, Inc.

142

91

American Express Publishing
Corp.

55

84

TRS(a)



1,483

Other

217

132

Total

$

3,893

$

8,317

(a)

During 2009, due to a strategic shift in
the way American Express manages its consolidated excess cash, Credco repaid
approximately $2.6 billion and $1.5 billion of master notes with American
Express and TRS, respectively.

Short-term debt to
affiliates consists primarily of master note agreements for which there is no
stated term.

Sources of Funds

Credcos
business is financed by borrowings consisting principally of issuances of U.S.
and non-U.S. dollar term debt, borrowings under bank credit facilities in
certain international markets, intercompany borrowings, and issuances of commercial
paper, as well as cash provided through operations. Since September 2008, Credcos
reliance on commercial paper as a funding source has diminished considerably.
This short-term source has not been replaced with other types of short-term
debt because Credcos
funding needs have decreased due to the reduction of receivable purchases
resulting from the amendment to the Receivables Agreements as discussed
previously. Credco has not issued asset-backed securities in the past three
years or in any previous years (although Credco has the ability to sell receivables
to TRS, which in turn can securitize them). For a more detailed discussion
of Credcos
funding strategies, refer to Managements Discussion and Analysis
of Financial Condition and Results of OperationsConsolidated Capital Resources
and LiquidityFunding Strategy.

The weighted
average effective interest rates on an annual basis of all borrowings, after
giving effect to commitment fees under lines of credit and the impact of
interest rate swaps, during the following years were as follows:

Year

Weighted Average Effective
Interest Rate

2009

2.15

%

2008

3.95

%

2007

5.26

%

2006

4.63

%

2005

3.63

%

Refer to Notes
5, 6 and 10 to the Consolidated Financial Statements for additional information
about Credcos short-term and long-term debt, including lines of credit.

During the
second quarter of 2009, Credcos rating was downgraded by Moodys Investor Services
(Moodys) and Standard and Poors (S&P), two of the major rating agencies,
as follows:

S&P
lowered the long-term ratings on Credco from A to BBB+ and its short-term
ratings from A-1 to A-2.

Credco does not believe its
commercial paper and term debt pricing were adversely affected by the ratings
actions in 2009; however, it is difficult to draw conclusions given the severe
market disruptions and the

8

unprecedented
intervention of the U.S. government in the capital markets since the second
half of 2008. There can be no assurance that Credco will maintain its current
credit ratings. Failure to maintain those ratings could, among other things,
limit Credcos access to the capital markets and adversely affect the
cost and other terms upon which Credco is able to obtain funding and increase
Credcos cost of capital.

Foreign Operations

See Notes 1, 8
and 14 to the Consolidated Financial Statements for information about Credcos
foreign exchange translation and operations in different geographic regions.

Employees

As of December
31, 2009 and 2008, Credco had 17 and 22 employees, respectively.

9

Item 1A.

RISK FACTORS

Based on the
information currently known, Credco believes that the matters discussed below
identify the most significant risk factors affecting Credco. However, the risks
and uncertainties that Credco faces are not limited to those described below.
Additional risks and uncertainties not presently known to Credco or that Credco
currently believes to be immaterial may also adversely affect Credcos business
and the trading price of its securities.

The global
money and capital markets, while demonstrating generally improved conditions,
remains susceptible to volatility and disruption since August 2007, which could
negatively impact market liquidity conditions.

Credco relies
on liquidity to pay operating expenses, interest on debt and dividends on
capital stock and to repay maturing liabilities. Without sufficient liquidity,
Credco could be forced to limit its business growth or curtail operations. The
principal sources of Credcos liquidity are payments from cardmembers, cash
flows from its investment portfolio and assets, which are mainly cash or assets
that are readily convertible into cash, instruments such as unsecured medium-
and long-term notes and assets that could be sold to TRS for securitizations, and long-term committed bank
borrowings facilities in certain non-U.S. markets, as well as access to
additional liquidity in the form of cash and readily marketable securities held
by certain affiliates through intercompany loan agreements.

Notwithstanding
Credcos solid financial position, Credco is not immune from the pressures
experienced broadly across the financial markets. The fragility of the credit
markets and the current economic and regulatory environment has impacted
financial services companies. Although the market for Credcos unsecured term
debt has improved since the third quarter of 2009, there is no assurance that
the markets will be open to us in the future. Therefore, Credcos ability to
obtain financing in the debt capital markets for unsecured term debt is
dependent on a continuation of investor demand. Credco also has less
flexibility in accessing the commercial paper market as a short-term funding
vehicle due to its short-term debt rating and the volatility in the commercial
paper market generally.

In the event
that current sources of liquidity, including internal sources, do not satisfy
Credcos needs, it could be required to seek additional financing. The
availability of additional financing will depend on a variety of factors such
as market conditions, the general availability of credit, the overall
availability of credit to the financial services industry, Credcos long-term
debt credit ratings, which were downgraded in April 2009 by two of the major
rating agencies, and credit capacity. Additionally, it is possible that lenders
could develop a negative perception of Credcos long- or short-term financial
prospects if it incurs large credit losses or if the level of its business
activity decreased due to an economic downturn or due to perceived operational
risk. Similarly, Credcos access to funds may be impaired if regulatory
authorities or rating agencies take negative actions against Credco.

Disruptions,
uncertainty or volatility in the capital and credit markets may also limit
Credcos access to capital required to operate its business. Such market
conditions may limit its ability to replace, in a timely manner, maturing
liabilities and access the capital necessary to grow its business. As such,
Credco may be forced to delay raising capital, or bear an unattractive cost to
raise capital, which could decrease profitability and significantly reduce
financial flexibility.

If levels of
market disruption and volatility worsen, there can be no assurance that Credco
will not experience an adverse effect. This may have a material impact on
Credcos ability to access capital and on its business, financial condition and
results of operations.

10

Difficult conditions
in the global capital markets and the economy generally may materially
adversely affect Credcos
business and results of operations.

Credcos
results of operations are materially affected by conditions in the global
capital markets and the economy in general, both in the United States and
elsewhere.

Ongoing
concerns over the availability and cost of credit, the mortgage and real estate
markets, sovereign debt crises, fear of a double-dip recession and geopolitical
issues have contributed to uncertain expectations for the economy and the
markets going forward. These factors, combined with still relatively low levels
of business and consumer confidence and increased unemployment, continue to
impact global economies, which helped drive declines in credit and charge card
usage and adverse changes in payment patterns by consumers and businesses. It
is unclear the degree to which the U.S. governments economic stimulus spending
will foster economic growth in the United States during the remainder of 2010.

This
environment has had, and may continue to have, an adverse effect on Credco, in
part because it is dependent upon consumer and business behavior. If the
economy were to worsen, customer behaviors could change further. Credcos
revenue growth is likely to decline in such circumstances and, in certain
instances, revenues may decrease, and its profit margins could erode. In
addition, in the event of extreme prolonged market adversity, such as the
global credit crisis and economic slowdown, Credco could incur significant
losses.

The scarcity
of available credit, lack of confidence in the financial markets, reduced
consumer and business spending, and credit metric performance also pose other
risks to Credcos results of operations and financial condition. In particular,
Credco may face the following risks, among others, in connection with these
events:



The
processes Credco uses to estimate losses may no longer be reliable because
they rely on complex judgments, including forecasts of economic conditions,
which may no longer be capable of accurate estimation.



American
Express ability to assess the creditworthiness of its customers may be
impaired if the models and approaches it uses to select, manage, and
underwrite credit to its customers become less predictive of future
write-offs.

Political or
economic instability in certain regions or countries could also affect American
Express commercial or other lending activities, among other businesses, or
result in restrictions on convertibility of certain currencies.

Terrorist
attacks, natural disasters or other catastrophic events may have a negative
effect on Credcos business and infrastructure, including its information
technology systems. Because Credco derives a portion of its revenues from
travel-related spending, its business will be sensitive to safety concerns, and
thus is likely to decline during periods in which travelers become concerned
about safety issues or when travel might involve health-related risks.

If the
conditions described above (or similar ones) persist or worsen, Credco could
experience continuing or increased adverse effects on its results of operations
and financial condition.

The impairment of
other financial institutions could adversely affect Credco.

Credcos
ability to engage in routine funding transactions could be adversely affected
by the actions and commercial soundness of other financial services
institutions. Financial services institutions are interrelated as a result of
trading, clearing, counterparty or other relationships. Credco routinely
executes transactions with counterparties in the financial services industry,
including commercial banks, investment banks and insurance companies. Defaults
or non-performance by, or even rumors or questions about, one or more financial
services institutions, or the financial services industry generally, have led
to market-wide liquidity problems and could lead to losses or defaults by one
or more of Credcos counterparties, which, in turn, could have a

Any reduction in
Credcos credit ratings could increase the cost of its funding from and
restrict Credcos access to the capital markets and have a material adverse
effect on Credcos results of operations and financial condition.

Although
Credcos long-term debt is currently rated investment grade by the major rating
agencies, the ratings of that debt were downgraded during the second
quarter of 2009 by Moodys Investors Services (Moodys) and Standard &
Poors (S&P), two of the major rating agencies. The rating agencies
regularly evaluate Credco, and their ratings of Credcos long-term and
short-term debt are based on a number of factors, including Credcos financial
strength, perceived operation risk as well as factors not entirely within Credcos
control, including conditions affecting the financial services industry
generally and the wider state of the economy. There can be no assurance that
Credco will maintain its current credit ratings. Failure to maintain those
ratings could, among other things, limit Credcos access to the
capital markets and adversely affect the cost and other terms upon which Credco
is able to obtain funding and increase Credcos cost of capital.

Credco cannot
predict what actions rating agencies may take. As with other companies in the
financial services industry, Credcos ratings could be downgraded at any time
and without any notice by any of the rating agencies.

Adverse currency
fluctuations and foreign exchange controls could decrease revenue Credco receives
from its international operations.

Credco
generates a portion of its revenue from activities outside the United States.
Credco is exposed to foreign exchange risk from its international operations,
and some of the revenue it generates outside the United States is subject to
unpredictable and indeterminate fluctuations if the values of other currencies
change relative to the U.S. dollar. Resulting exchange gains and losses are
included in Credcos net income. Furthermore, Credco may become subject to exchange
control regulations that might restrict or prohibit the conversion of Credcos
other revenue currencies into U.S. dollars. The occurrence of any of these
events or circumstances could decrease the revenues Credco receives from its
international operations and have a material adverse effect on Credcos
business.

The risk management
policies and procedures of Credco and the Card Issuers may not be effective.

Credco must
effectively manage credit risk related to consumer debt, business loans,
merchant bankruptcies, the rate of bankruptcies, and other credit trends that
can affect spending on Card products, debt payments by individual and corporate
customers and businesses that accept American Express Card products.

Credit risk is
the risk of loss from obligor or counterparty default. Credco is exposed to
credit risk through the cardmember receivables and cardmember loans it
purchases generally without recourse as well as through its participation
interests. Third parties may default on their obligations to us due to
bankruptcy, lack of liquidity, operational failure or other reasons. Country,
regional and political risks are components of credit risk. Rising
delinquencies and rising rates of bankruptcy are often precursors of future
write-offs and may require Credco to increase its reserve for losses. Higher
write-off rates and an increase in Credcos reserve for losses adversely affect
Credcos profitability and may increase Credcos cost of funds.

Although
Credco and the Card Issuers make estimates to provide for credit losses in
their respective outstanding portfolio of loans and receivables, these
estimates may not be accurate. In addition, the information Credco and the Card
Issuers use in managing their credit risk may be inaccurate or incomplete.
Although Credco regularly reviews its and the Card Issuers credit exposure to
specific clients, counterparties, industries, countries and regions that Credco
and the Card Issuers believe may present credit concerns, default risk may
arise from events or circumstances that are difficult to foresee or detect,
such as fraud. Credco and

12

the Card
Issuers may also fail to receive full information with respect to the credit
risks of customers.

Credco must
also effectively manage the market risk to which it is exposed. Market risk is
the risk to earnings or value resulting from movements in market prices. Credco
is primarily exposed to market risk from the impact of interest rate movements
on its borrowings and investment portfolios. If the rate of interest Credco
pays on its borrowings increases, this will lead to Credco increasing the
discount rate at which it offers to purchase receivables in order to achieve
the minimum required 1.25 fixed charge coverage ratio. To the extent this increased price is not
acceptable to the seller, the amount of receivables purchased may decline,
which would result in a lower net income to Credco.

Credco must
also accurately estimate the fair value of the assets in its investment
portfolio and, in particular, those investments that are not readily
marketable.

Additionally,
Credco must also effectively manage liquidity risk to which it is exposed.
Liquidity risk is defined as the inability to access cash and equivalents
needed to meet business requirements and satisfy Credcos obligations. If Credco
is unsuccessful in managing its liquidity risk, it may maintain too much
liquidity, which can be costly and limit financial flexibility, or it may be
too illiquid, which could result in financial distress during a liquidity
event. For additional information regarding Credcos management of liquidity
risk, see Adverse capital and credit market
conditions may significantly affect Credcos ability to meet liquidity needs,
access to capital and cost of capital above.

Finally,
Credco must also manage the operational risks to which it is exposed. Credco
considers operational risk to be the risk of not achieving business objectives
due to inadequate or failed processes or information systems, human error, or
the external environment, such as natural disasters. Operational risks include
the risk that Credco may not comply with specific regulatory or legal
requirements, exposing Credco to fines and/or penalties and possibly brand
damage; employee error or intentional misconduct that results in a material financial
misstatement; or a failure to monitor an outsource partners compliance with a
service level agreement, resulting in economic harm to Credco.

On November
16, 2009, Credco filed an amendment to its Annual Report on Form 10-K for the
fiscal year ended December 31, 2008 in order to restate certain of its
consolidated financial statements and amend related disclosures, as described
in Item 7, Managements Discussion and Analysis of Financial Condition
and Results of OperationRestatement below. Additionally,
on March 31, 2010, Credco filed an amendment to its Quarterly Report on Form
10-Q for the quarterly period ended September 30, 2009 to restate its consolidated
cash flows for the nine months then ended as described in Item 7, Managements
Discussion and Analysis of Financial Condition and Results of OperationRestatement below.
As further described in Item 9A(T), Controls and Procedures, Credcos
management has concluded that as of December 31, 2009, its disclosure controls
and procedures and its internal controls over financial reporting were not effective
because of material weaknesses in internal control over financial reporting relating
to the processes used to record and monitor net investments in consolidated
foreign subsidiaries and related to the preparation of financial statements. Although Credco has taken remedial actions,
as described in Item 9A(T), Controls and Procedures, to address
the identified material weaknesses, there can be no assurance that its management
will determine in the future that its disclosure controls and procedures or
internal control over financial reporting are effective.

Although
Credco and the Card Issuers have devoted significant resources to develop their
risk management policies and procedures and expect to continue to do so in the
future, Credcos risk management techniques and hedging strategies may not
be fully effective. See Item 9A(T), Controls and Procedures for a
discussion of material weaknesses in Credcos internal control over financial
reporting. See Item 7A Quantitative and Qualitative Disclosures About Market
Risk for
a discussion of the policies and procedures Credco uses to identify, monitor
and manage the risks Credco assumes in conducting its businesses. Management
of credit, market and operational risk requires, among other things, policies
and procedures to record properly and verify a large number of transactions and
events, and these policies and procedures may not be fully effective.

13

Credco is an
indirect wholly-owned subsidiary of American Express and therefore subject to
strategic decisions of
American Express and affected by American Express performance.

Credco is
fundamentally affected by its relationship with American Express. As an
indirect wholly-owned subsidiary of American Express, Credco is managed by
officers and employees of American Express and Credco is subject to a wide
range of possible strategic decisions that American Express may make from time
to time. Those strategic decisions could include the level and types of
financing Credco provides to support the business of American Express and its
subsidiaries and the level and types of transactional or other support made
available to Credco by American Express. In addition, circumstances affecting
American Express can significantly affect Credco. For example, Credcos debt
ratings are closely tied to those of American Express, and when rating agencies
take actions regarding American Express ratings, they may take the same
actions with respect to Credcos ratings. Significant changes in American
Express strategy or its relationship with Credco or material adverse changes
in the performance of American Express or its other subsidiaries could have a
material adverse effect on Credco. The outstanding debt and other securities of
Credco are not obligations of American Express, TRS or other American Express
subsidiaries.

Credco is an
indirect wholly-owned subsidiary of American Express and any arrangements or
agreements between the two entities may have different terms than would have
been negotiated by independent, unrelated parties.

Credco is an
indirect wholly-owned subsidiary of American Express. As a result, the arrangements
and agreements between Credco and its subsidiaries, on the one hand, and
American Express and its subsidiaries, principally the Card Issuers, on the
other hand, may have different terms and provisions than would have been
negotiated by independent, unrelated parties. The principal agreements between
the parties are the receivables purchase agreements between Credco and each of
the Banks and TRS. Credco or its subsidiaries are also parties to agreements
with Card Issuers in various international markets for the purchase or transfer
with recourse of card receivables and for unsecured loans to Card Issuers. The
agreements between Credco and the Card Issuers provide that the parties intend
that the transactions thereunder be conducted on an arms length basis and
that, for example, the price at which receivables are sold to Credco or its
subsidiaries be at fair market value (including consideration of changes in
interest rates or significant changes in collectibility). While there can be
no assurance that the terms of these arrangements are the same as would be
negotiated between independent, unrelated parties, Credco and its subsidiaries
are prohibited, under the terms of the indenture governing Credcos senior
debt securities, from engaging in transactions with any other American Express
entities (such as the Card Issuers) on a basis that is materially less
favorable to Credco or its subsidiaries than would be the case if the
transaction were with an unrelated third party.

Credco and its
subsidiaries are dependent on the Card Issuers that generate receivables.

Credco and its
subsidiaries are dependent on the Card Issuers that generate receivables.
Credco and American Express Overseas Credit Corporation Limited (AEOCC), a
wholly-owned subsidiary of Credco, are parties to receivables purchase
agreements from the Card Issuers. These receivables agreements generally
require that non-interest and interest-bearing receivables be purchased at
discount rates that are negotiated and determined at the time of purchase based
upon the nature of the receivables. Credco and AEOCC are dependent upon these
contractual arrangements. Lower levels of cardmember receivables and loans
generated by the Card Issuers from which Credco and AEOCC purchase receivables
would result in a reduction in the level of finance operations and a reduction
in revenues and net income of Credco and AEOCC.

In October
2008, Credco and each of FSB and Centurion Bank mutually agreed to amend their
respective receivables purchase agreements to allow the Banks flexibility, from
time to time, to sell receivables to Credco or to retain the receivables and
fund them from their own sources. However, the amended agreements require the
Banks to sell either all or none of their charge card receivables to Credco at
any given time. The Banks, therefore, may not direct receivables with
particular risk characteristics for sale to Credco. The amendments have led to
a material reduction in Credcos purchases of receivables from the Banks and
could result in increased volatility in the volume of Credcos purchases of
receivables from time to time. This in

14

turn could increase the volatility of
Credcos operating metrics that are volume-driven, including discount revenue,
interest expense and net income. However, other measures of profitability that
Credco believes to be important to debt investors, such as the fixed charge
coverage ratio and margins, are generally not materially impacted by a
reduction in purchased receivables volume.

The Credit Card Accountability Responsibility and Disclosure Act (CARD
Act) of 2009 will significantly impact Credcos business practices and could
have a material adverse effect on Credcos results of operations.

The CARD Act requires American Express to
make fundamental changes to many of American Express current business
practices, including marketing, underwriting, pricing and billing. Among other
things, the CARD Act prohibits an issuer from increasing the annualized
percentage rate (APR) on outstanding balances (with limited exceptions),
requires additional account disclosures, provides consumers with the right to
opt out of significant changes to account terms, and restricts penalty fees and
charges that may be imposed by an issuer.

Most of the requirements of the CARD Act
became effective in February 2010. Additional amendments to Regulation Z
revising the open-end credit disclosure requirements become effective on July
1, 2010. Two provisions of the CARD Act do not come into effect until August
22, 2010. One of these provisions addresses the reasonableness and
proportionality of penalty fees charged. The other provision requires issuers
to evaluate past interest rate increases twice per year. The Federal Reserve is
required to adopt regulations implementing these provisions, but has not yet
done so. Because implementing regulations are not final, it is difficult to assess
the impact of these two provisions. However, implementing these provisions
could have a significant impact on American Express results of operations.

While American Express is making certain
changes to its product terms and practices that are designed to mitigate the
impact of the changes required by the CARD Act, there is no assurance that it
will be successful. The long-term impact of the CARD Act on American Express
business practices and revenues will depend upon a number of factors, including
its ability to successfully implement its business strategies, consumer
behavior and the actions of American Express competitors, which are difficult
to predict at this time. If American Express is not able to lessen the impact
of the changes required by the CARD Act, it will have a material adverse effect
on results of operations. This, in turn, may also directly impact Credcos
results of operations.

Proposed legislative and regulatory reforms could, if enacted or
adopted, result in our business becoming subject to significant and extensive
additional regulations, which could adversely affect our results of operations
and financial condition.

The extreme disruptions in the capital
markets since mid-2007 and the resulting instability and failure of numerous financial
institutions have led to numerous proposals for legislative and regulatory
reform that could substantially intensify the regulation of the financial
services industry and that may significantly impact American Express and
Credco. These proposals include the following:



Establishing a federal consumer financial
protection agency that would have, among other things, broad authority to
regulate, and take enforcement actions against, providers of credit, savings,
payment and other consumer financial products and services.



Requiring heightened scrutiny and stricter
regulation of any financial institution whose combination of size, leverage
and interconnectedness could pose a threat to financial stability if it
failed, restricting the activities of such institutions, and allowing
regulators to dismantle large or systemically important banks and financial
institutions, even healthy ones, if they are considered a grave risk to the
economy.



Requiring large financial institutions,
including, as proposed, American Express, to contribute to a fund that would
be used to recover the cost of dismantling a bank or financial institution
that is dismantled because it poses a grave risk to the economy.



Limiting the size and activities of financial
institutions, including proposals to repeal portions of the

15

Gramm-Leach-Bliley Act.



Amending regulatory capital standards, and
increasing regulatory capital requirements, for banks and other financial
institutions, including American Express, and establishing new formulaic
liquidity requirements applicable to financial institutions.

Lawmakers and regulators in the United States
and worldwide continue to consider these and a number of other wide-ranging and
comprehensive proposals for altering the structure, regulation and competitive
relationships of the nations financial institutions. For example, separate
comprehensive financial reform bills have been introduced in both houses of Congress;
the U.S. House of Representatives passed a
financial reform bill in December of 2009 and the U.S. Senate is currently considering
similar legislation.

In addition to proposed legislation affecting
the financial services industry, Credcos results of operations could be
adversely impacted by other legislative action or inaction, including the potential
failure of the U.S. Congress to extend the active financing exception to
Subpart F of the Internal Revenue Code (expired on December 31, 2009), which
could increase Credcos effective tax rate and have an adverse impact on
its net income. In addition, various proposals to reform the taxation of income
earned by U.S. companies international business operations could, if enacted,
adversely affect Credcos net income.

We cannot predict the final form, or effects
on American Express and Credco, of these or other potential or proposed
reforms. These and other potential or proposed legislative and regulatory
changes could impact the profitability of Credcos business activities, limit
our ability to pursue business opportunities, require Credco to change certain
of its business practices or alter its relationships with customers, affect
retention of key personnel, or expose Credco to additional costs (including
increased compliance costs). Such changes also may require us to invest
significant management attention and resources to make any necessary changes
and could adversely affect our results of operations and financial condition.

16

Other
Reporting Matters

Accounting
Developments

See
the Recently Issued Accounting Standards section of Note 1 to the Consolidated
Financial Statements.

Forward-looking
Statements

Various statements have been made in this
Annual Report on Form 10-K that may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may also be made in Credcos other reports filed
with or furnished to the Securities and Exchange Commission (SEC) and in other
documents. In addition, from time to time, Credco, through its management, may
make oral forward-looking statements. Forward-looking statements are subject
to risks and uncertainties, including those identified above and below, which
could cause actual results to differ materially from such statements. The words
believe, expect, anticipate, optimistic, intend, plan, aim,
will, may, should, could, would, likely and
similar expressions are intended to identify forward-looking statements. Credco
cautions you that the risk factors described above and other factors described
below are not exclusive. There may also be other risks that Credco is unable
to predict at this time that may cause actual results to differ materially from
those in forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
on which they are made. Credco undertakes no obligation to update or revise any
forward-looking statements.

Factors that could cause actual results to
differ materially from Credcos forward-looking statements include, but are not
limited to:



credit trends, which will depend in part on
the economic environment, including, among other things, the housing market
and the rates of bankruptcies, which can affect spending on card products and
debt payments by individual and corporate customers;



Credcos ability to accurately estimate the
provisions for losses in Credcos outstanding portfolio of cardmember
receivables and loans;



fluctuations in foreign currency exchange
rates;



negative changes in Credcos credit
ratings, which could result in decreased liquidity and higher borrowing
costs;



changes in laws or government regulations
affecting American Express business, including the potential impact of
regulations adopted by federal bank regulators relating to certain credit and
charge card practices;



the effect of fluctuating interest rates,
which could affect Credcos borrowing costs;



the impact on American Express business
resulting from continuing geopolitical and economic uncertainty;



Credcos ability to satisfactorily
remediate (i) the accounting errors resulting in the restatements or (ii) its
material weaknesses in internal control over financial reporting; and



Credcos ability to satisfy its liquidity
needs and execute on its funding plans, which will depend on, among other
things, Credcos future business growth, its credit ratings, market capacity
and demand for securities offered by Credco, performance by Credcos
counterparties under its bank credit facilities and other lending facilities,
and regulatory changes, including changes to the policies, rules and
regulations of the Board of Governors of the Federal Reserve System.

17

Item 1B.

UNRESOLVED STAFF COMMENTS

Not applicable.

Item 2.

PROPERTIES

Credco neither owns nor leases any material
physical properties.

Item 3.

LEGAL PROCEEDINGS

There are no material pending legal
proceedings to which Credco or its subsidiaries is a party or of which any of their
property is the subject. Credco knows of no such proceedings being contemplated
by government authorities or other parties.

American
Express, through its wholly-owned subsidiary, TRS, owns all of the outstanding
common stock of Credco. Therefore, there is no market for Credcos common
stock.

Credco paid
cash dividends of $400 million and $580 million to TRS in 2009 and 2008,
respectively. For information about limitations on Credcos ability to pay
dividends, see Note 7 to the Consolidated Financial Statements.

Item 6.

SELECTED FINANCIAL DATA

The following
summary of certain consolidated financial information of Credco was derived
from audited financial statements for the years ended December 31:

(Millions)

2009

2008

2007

2006

2005

Income Statement Data

Revenues

$

1,217

$

3,433

$

3,870

$

3,017

$

2,276

Provisions for losses, net of recoveries

214

641

842

589

662

Interest expense (including to affiliates)

629

1,618

2,046

1,614

1,141

Income tax provision

8

132

60

95

50

Net income

362

864

725

622

415

Balance Sheet Data

Cash and cash equivalents

$

304

$

8,855

$

2,925

$

737

$

1,051

Gross cardmember receivables

9,893

10,859

26,233

27,506

24,421

Reserve for losses, cardmember receivables

141

204

831

739

671

Gross cardmember loans

474

498

403

356

569

Reserve for losses, cardmember loans

19

14

10

10

15

Loans to affiliates

10,127

11,726

11,201

9,691

8,254

Investment securities (including
restricted)

2,039

3,084

3,044

3,015

2,996

Total assets

28,152

39,265

45,843

40,963

37,368

Short-term debt (including due to affiliates)

4,910

15,684

19,775

15,469

15,982

Long-term debt

19,478

20,010

22,283

21,790

16,929

Shareholders equity

3,381

3,033

3,444

3,419

3,270

Cash dividends

400

580

750

500

200

19

Item 7.

MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Restatements

As disclosed previously, on
November 16, 2009, Credco restated its financial statements and filed an
amended Annual Report on Form 10-K/A for the fiscal year ended December 31,
2008, and amended Quarterly Reports on Form 10-Q/A for the periods ended March
31, and June 30, 2009. The restatement was to correct errors in the translation
of foreign currency balances related to an investment in a consolidated foreign
subsidiary. These errors resulted in:



Incorrect transaction
losses of $135 million being recorded in Other Revenues in the Consolidated
Statements of Income from September 2007 through June 2009; and



Corresponding incorrect
credits in Foreign Currency Translation Adjustments in Accumulated Other
Comprehensive (Loss) Income on the Consolidated Balance Sheets over the same
period.

The effect of the error in
the translation of foreign currency balances, together with unrelated
immaterial errors affecting the income tax provision, resulted in an
understatement of net income for fiscal year 2008 and 2007 by $119 million
(from $745 million to $864 million, as restated) and $5 million (from $720
million to $725 million, as restated), respectively. The correction of these
errors resulted in an increase in Credcos ratio of earnings to fixed charges
from 1.50 to 1.62 (as restated) for fiscal year 2008 and no change to Credcos
ratio of earnings to fixed charges of 1.38 for fiscal year 2007. The effect of
these errors also resulted in an overstatement of net income for the three-month
periods ended June 30, 2009 and March 31, 2009 by $41 million (from $68 million
to $27 million, as restated) and $9 million (from $144 million to $135 million,
as restated), respectively. The correction of these errors resulted in a decrease
in Credcos ratio of earnings to fixed charges from 1.66 to 1.51 (as
restated) for the six-month period ended June 30, 2009 and an increase in this
ratio from 1.78 to 1.81 (as restated) for the three-month period ended March
31, 2009.

Additionally,
on March 31, 2010, Credco filed an amendment to its Quarterly Report on Form
10-Q for the quarterly period ended September 30, 2009 (the Third Quarter
2009 Form 10-Q/A) to restate its Consolidated Statement of Cash Flows for
the nine months then ended. The restatement is the result of a correction of a
manual error in the classification of cash flows pertaining to amounts Due from
Affiliates. The error resulted from an incorrect identification of cash flows
between investing and operating activites from transactions between Credco and
its affiliates. As a result, a cash outflow from investing activities was
inadvertently recorded as a cash inflow, with an equal and offsetting error in cash flow from
operating activities. The error in the classification of cash flows relating
to amounts Due from Affiliates resulted in an understatement of cash from
operating activities of $3.9 billion (from an outflow of $3.1 billion to an
inflow of $849 million, as restated) and a corresponding overstatement of cash
from investing activities (from an inflow of $7.7 billion to an inflow $3.7
billion, as restated). The restatement did not impact Credcos previously
reported overall net change in cash and cash equivalents in its Consolidated
Statement of Cash Flows, or Credcos Consolidated Balance Sheet or Consolidated
Statement of Income, for the period presented.

20

Critical Accounting Policies

Credcos
significant accounting policies are described in Note 1 to the Consolidated
Financial Statements. The following provides information about three critical
accounting policies that are important to the Consolidated Financial Statements
and that require significant management assumptions and judgments.

Reserves for Cardmember Losses

Description

Assumptions/Approach
Used

Effect if
Actual Results Differ from
Assumptions

Credcos reserves for losses
relating to cardmember receivables and loans represent managements best
estimate of the losses inherent in Credcos outstanding portfolio of
receivables and loans.

Reserves for cardmember
receivables and loans losses are primarily based upon models that analyze
portfolio performance and reflect managements judgment regarding overall
reserve adequacy. The analytic models take into account several factors,
including average losses and recoveries over an appropriate historical
period. Management considers whether to adjust the analytic models for
specific factors such as increased risk in certain portfolios, impact of risk
management initiatives on portfolio performance and concentration of credit
risk based on factors such as tenure, industry or geographic regions. In
addition, management adjusts the reserves for losses for other external
environmental factors including leading economic and market indicators such
as the unemployment rate, Gross Domestic Product (GDP), home price indices,
non-farm payrolls, personal consumption expenditures index, consumer
confidence index, purchasing managers index, bankruptcy filings, and the
legal and regulatory environment. Generally, due to the short-term nature of
cardmember

To the extent historical
credit experience updated for emerging market trends in credit are not
indicative of future performance, actual losses could differ significantly
from managements judgments and expectations, resulting in either higher or
lower future provisions for losses, as applicable.

As of December 31, 2009, if an increase in write-off rates was 5 percent of
cardmember receivables and loans at such date, the reserve for losses would
increase by approximately $7 million. This sensitivity analysis does not
represent managements expectations of the deterioration in write-offs but is
provided as a hypothetical scenario to assess the sensitivity of the
provision for cardmember losses to changes in key inputs.

The process for determining the reserve for cardmember losses requires a high
degree of judgment. It is possible that others, given the same information,
may at any point in time reach different reasonable conclusions.

(continued
on next page)

21

Reserves for Cardmember Losses (continued)

Description

Assumptions/Approach
Used

Effect if
Actual Results Differ from
Assumptions

receivables, the impact of
the other external environmental factors on the inherent losses within the
cardmember receivable portfolio is not significant. As part of this
evaluation process, management also considers various reserve coverage
metrics, such as reserves as a percentage of past-due amounts, reserves as a
percentage of cardmember receivables and loans, and net write-off coverage.

Cardmember receivables and
loans are written off when management deems amounts to be uncollectible and
this is generally determined by the number of days past due. Cardmember loans
are generally written off when 180 days past due. Cardmember receivables are
generally written off when they are 360 days past billing, apart from
cardmember receivables that are included in American Express U.S. Card
Services segment, which are written off when they are 180 days past due. Such
receivables are held by Credco Receivables Corporation (CRC). Refer to Note
3 to Credcos Consolidated Financial Statements.

Cardmember receivables and
loans in bankruptcy or owed by deceased individuals are written off upon
notification. Recoveries of both cardmember loans and receivables are
recognized on a cash basis.

In accordance with GAAP
governing fair value measurement and related disclosures, the objective of a
fair value measurement is to determine the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date (an exit price). The
disclosure guidance establishes a three-level hierarchy of valuation
techniques used to measure fair value. The fair value hierarchy gives the
highest priority to the measurement of fair value based on unadjusted quoted
prices in active markets for identical assets or liabilities (Level 1),
followed by the measurement of fair value based on pricing models with
significant observable inputs (Level 2), with the lowest priority given to
the measurement of fair value based on pricing models with significant
unobservable inputs (Level 3).

23

Fair Value Measurement (continued)

Description

Assumptions/Approach
Used

Effect if
Actual Results Differ from
Assumptions

Investment
Securities

Investment
Securities

Investment
Securities

Credcos investment
securities are comprised of U.S. Government Treasury and U.S. Government
Sponsored Agencies (e.g., Fannie Mae or Freddie Mac) obligations. The
investment securities are classified as available-for-sale with changes in
fair value recorded in accumulated other comprehensive (loss) income within
shareholders equity on Credcos Consolidated Balance Sheets.

The fair market values for
Credcos investment securities are obtained primarily from pricing services
engaged by Credco. The fair values provided by the pricing services are
estimated by using pricing models, where the inputs to those models are based
on observable market inputs. The inputs to the valuation techniques applied
by the pricing services are typically benchmark yields, benchmark security
prices, credit spreads, prepayment speeds, reported trades and/or
broker-dealer quotes, all with reasonable levels of transparency. The pricing
services do not apply any adjustments to the pricing models used. In
addition, Credco did not apply any adjustments to prices received from the
pricing services. Credco reaffirms its understanding of the valuation
techniques used by its pricing services at least annually. In addition,
Credco corroborates the prices provided by its pricing services to test their
reasonableness by comparing their prices to valuations from different pricing
sources. As of December 31, 2009 and 2008, all of Credcos investment
securities are classified in Level 2 of the fair value hierarchy. Refer to
Note 2 to Credcos Consolidated Financial Statements.

In the measurement of fair
value for Credcos investment securities, even though the underlying inputs
used in the pricing models are directly observable from active markets or
recent trades of similar securities in inactive markets, the pricing models
do entail a certain amount of subjectivity and therefore differing judgments
in how the underlying inputs are modeled could result in different estimates
of fair value.

24

Fair Value Measurement (continued)

Description

Assumptions/Approach
Used

Effect if
Actual Results Differ from
Assumptions

Other-Than-Temporary
Impairment

Other-Than-Temporary
Impairment

Realized losses are
recognized when management determines that a decline in value is other than
temporary, which requires judgment regarding the amount and timing of
recovery.

Credco reviews and evaluates its investment securities at least quarterly,
and more often as market conditions may require, to identify investment
securities that have indications of other-than-temporary impairments. The
determination of other-than-temporary impairment is a subjective process,
requiring the use of judgments and assumptions. Accordingly, Credco considers
several metrics when evaluating investment securities for an
other-than-temporary impairment. The key factors considered when assessing
other-than-temporary impairment include the determination of the extent to
which the decline in fair value of the investment security is due to
increased default risk for the specific issuers or market interest rate risk.
With respect to increased default risk, Credco assesses the collectibility of
principal and interest payments by monitoring a number of issuer-specific
factors, and the extent to which amortized cost exceeds fair value and the
duration and size of that difference. With respect to market interest rate
risk, including benchmark interest rates and credit spreads, Credco assesses
whether it has the intent to sell the investment securities and whether it is
more likely than not that Credco will not be required to sell the investment
securities before recovery of any unrealized losses. Refer to Note 4 to
Credcos Consolidated Financial Statements.

In determining whether any
of Credcos investment securities are other-than-temporarily impaired, a
change in facts and circumstances could lead to a change in management
judgment around Credcos view on collectibility and credit quality of the issuer,
or Credcos intent to sell the investment securities and whether it is more
likely than not that Credco will not be required to sell the investment
securities before recovery of any unrealized losses. Therefore, it is at
least reasonably possible that a change in estimate will occur in the near
term relating to other-than-temporary impairment. This could result in Credco
recording an other-than-temporary impairment loss through earnings with a
corresponding offset to accumulated other comprehensive (loss) income. As of
December 31, 2009, Credco had no gross unrealized losses in its investment
securities portfolio.

25

Fair Value Measurement (continued)

Description

Assumptions/Approach
Used

Effect if
Actual Results Differ from
Assumptions

Derivative
Instruments

Derivative
Instruments

Derivative
Instruments

Credcos primary derivative
instruments include interest rate swaps, foreign currency forward agreements,
and cross-currency swaps. Derivative instruments are reported at fair value
in other assets and other liabilities on Credcos Consolidated Balance
Sheets. Changes in fair value are recorded in accumulated other comprehensive
(loss) income, and/or in the Consolidated Statements of Income, depending on
(i) the documentation and designation of the derivative instrument, and (ii)
if the derivative instrument is in a hedging relationship, its effectiveness
in offsetting the changes in the designated risk being hedged.

The fair values of Credcos
derivative instruments is estimated by using either a third party valuation
service that uses proprietary pricing models or by using internal pricing
models, neither of which contains a high level of subjectivity as the
valuation techniques used do not require significant judgment and inputs to
those models are readily observable from actively quoted markets. In each
case, the valuation models used are consistently applied and reflect the
contractual terms of the derivatives, including the period of maturity, and
market-based parameters such as interest rates, foreign exchange rates, and
volatility.

Credit valuation adjustments are necessary when the market parameters (for
example, a benchmark curve) used to value the derivative instruments are not
indicative of the credit quality of Credco or its counterparties. Credco
considers the counterparty credit risk by applying an observable forecasted
default rate to the current exposure.

In the measurement of fair
value for Credcos derivative instruments, although the underlying inputs
used in the pricing models are readily observable from actively quoted
markets, the pricing models do entail a certain amount of subjectivity and
therefore, differing judgments in how the underlying inputs are modeled could
result in different estimates of fair value. In addition, any necessary
credit valuation adjustments are based on observable default rates. A change
in facts and circumstances could lead to a change in management judgment
about counterparty credit quality, which could result in Credco recognizing
an additional counterparty credit valuation adjustment. As of December 31,
2009, the credit and nonperformance risks associated with Credcos derivative
instrument counterparties were not significant.

Credco manages derivative
instrument counterparty credit risk by considering the current exposure,
which is the replacement cost of contracts on the measurement date, as well
as estimating the maximum potential value of the contracts over the next 12
months, considering such factors as the volatility of the underlying or
reference index. To mitigate derivative instrument credit risk,
counterparties are required to be pre-approved and rated as investment grade.
Credcos derivative instruments are classified in Level 2 of the fair value
hierarchy. Refer to Notes 2 and 8 to Credcos Consolidated Financial
Statements.

26

Income Taxes

Description

Assumptions/Approach
Used

Effect if
Actual Results Differ from
Assumptions

The taxable income of
Credco is included in the consolidated United States federal income tax
return of American Express. Under an agreement with TRS, taxes are recognized
on a separate company basis. American Express is subject to the income tax
laws of the United States, its states and municipalities and those of the
foreign jurisdictions in which American Express operates. These tax laws are
complex, and the manner in which they apply to the taxpayers facts is
sometimes open to interpretation. In establishing a provision for income tax
expense, management must make judgments about the application of these
inherently complex tax laws.

Unrecognized Tax Benefits

Credco establishes a liability for unrecognized tax benefits,
which are the differences between a tax position taken or expected to be
taken in a tax return and the benefit recognized in the financial statements.

Unrecognized
Tax Benefits

In establishing a
liability for an unrecognized tax benefit, assumptions may be made in
determining whether a tax position is more likely than not to be sustained
upon examination by the taxing authority and also in determining the ultimate
amount that is likely to be realized. A tax position is recognized when,
based on managements judgment regarding the application of income tax laws,
it is more likely than not that the tax position will be sustained upon
examination. The amount of tax benefit recognized is based on managements
assessment of the most likely outcome on ultimate settlement with the taxing
authority. This measurement is based on many factors, including whether a tax
dispute may be settled through negotiation with the taxing authority or is
only subject to review in the courts. As new information becomes available,
management evaluates its tax positions, and adjusts its unrecognized tax
benefits, as appropriate.

Unrecognized
Tax Benefits

If the tax benefit
ultimately realized differs from the amount previously recognized in the
income tax provision, Credco recognizes an adjustment of the unrecognized tax
benefit through the income tax provision.

Deferred Taxes

Should a change in facts or circumstances lead to a change in
judgment about the ultimate realizability of a deferred tax asset, Credco
records or adjusts the related valuation allowance in the period that the
change in facts or circumstances occurs, along with a corresponding increase
or decrease to the income tax provision.

Deferred
Taxes

Deferred
Taxes

Deferred tax assets and
liabilities are determined based on the differences between the GAAP
financial statement and tax bases of assets and liabilities using the enacted
tax rates expected to be in effect for the years in which the differences are
expected to reverse. A valuation allowance is established when management
determines that it is more likely than not that all or some portion of the
benefit of the deferred tax asset will not be realized.

Since deferred taxes
measure the future tax effects of items recognized in the financial
statements, certain estimates and assumptions are required to determine
whether it is more likely than not that all or some portion of the benefit of
a deferred tax asset will not be realized. In making this assessment,
management analyzes and estimates the impact of future taxable income,
reversing temporary differences and available tax planning strategies. These
assessments are performed quarterly, taking into account any new information.

27

Consolidated Capital Resources and Liquidity

Credcos
balance sheet management objectives are to maintain:



A broad,
deep and diverse set of funding sources to finance its assets and meet
operating requirements; and



Liquidity
programs that enable Credco to satisfy all maturing financing obligations for
at least a 12-month period should some or all of its funding sources become
inaccessible.

Funding Strategy

Credco seeks
to maintain broad and well-diversified funding sources to allow it to meet its
maturing obligations, cost-effectively finance current and future asset growth,
as well as to maintain a strong liquidity profile. The diversity of funding
sources by type of debt instrument, by maturity and by investor base, among
other factors, provides additional insulation from the impact of disruptions in
any one type of debt, maturity, or investor. The mix of Credcos funding in any
period will seek to achieve cost-efficiency consistent with both maintaining
diversified sources and achieving its liquidity objectives. Credcos funding
strategy and activities are integrated into its asset-liability management
activities.

Credco, like
many financial services companies, has historically relied on the debt capital
markets to fulfill a substantial amount of its funding needs. It has a variety
of funding sources available to access the debt capital markets, including
senior unsecured debentures and commercial paper. The market for Credcos
unsecured term debt has improved in 2009 as the capital markets continue to
recover. One of the principal tenets of Credcos funding strategy is to issue
debt with a wide range of maturities to reduce and distribute its refinancing
requirements in future periods. Credco continues to assess its funding needs
and investor demand and could change the mix of its existing sources as well as
seek to add new sources to its funding mix. Credcos funding plan is subject to
various risks and uncertainties, such as disruption of financial markets,
market capacity, and demand for securities offered by Credco as well as any
regulatory changes or changes in its long-term or short-term credit ratings. Many of these risks and uncertainties are beyond Credcos
control.

Credcos
funding strategy for 2010 is to raise funds to meet short-term borrowings
outstanding, which includes seasonal and other working capital needs and
changes in receivables and other asset balances, while maintaining access to a
sufficient amount of its own and its affiliates cash and readily-marketable
securities that are easily convertible to cash, in order to be able to satisfy
all maturing funding obligations for a 12-month period. Credco has $3.5 billion
of unsecured long-term debt that will mature during 2010.

Credcos
liquidity and funding strategy is designed to support the maintenance of
appropriate and stable debt ratings from the major credit rating agencies,
including Moodys Investor Services (Moodys), Standard & Poors (S&P),
Fitch Ratings, and Dominion Bond Rating Service (DBRS). During 2009, three of
the four credit rating agencies that rate Credco provided updates on Credcos
ratings as follows:

Moodys



In the
second quarter of 2009, Moodys lowered the long-term ratings of Credco from
A1 to A2, reflecting Moodys concerns regarding the erosion in asset quality
and weaker revenue trends stemming from the severe U.S. recession. Moodys
also cited structural and regulatory changes in the credit card and consumer
lending industry as posing longer-term challenges. Moodys Prime-1
short-term rating was affirmed.

S&P



In the
second quarter of 2009, S&P lowered the long-term ratings on Credco from
A to BBB+ and its short-term ratings from A-1 to A-2. S&P indicated that
the ratings action was driven by its view that funding and liquidity will
remain concerns over the long-term given Credcos reliance on rate sensitive
wholesale funding.



On January
29, 2010, S&P raised its outlook for Credco from negative to stable
citing the recent improvements in American Express asset quality, and the
implications this has on its earnings and affirmed
its ratings.

28

DBRS



On January
26, 2010, DBRS announced that it had revised its outlook on the long-term
senior ratings of Credco (A (high)) from negative to stable, citing the
progress Amex has achieved in reducing risks in the balance sheet while
protecting and enhancing the overall franchise.

Credcos
Short-Term ratings, Long-Term ratings and Outlook as disclosed by the four
major credit rating agencies are as follows:

Credit
Agency

Short-Term
ratings

Long-Term
ratings

Outlook

DBRS

R-1 (middle)

A (high)

Stable

Fitch

F1

A+

Negative

Moodys

Prime-1

A2

Stable

S&P

A-2

BBB+

Stable

A downgrade in
Credcos debt rating could result in higher interest expense on Credcos
unsecured debt, as well as higher fees related to borrowings under its unused
lines of credit. In addition to increased funding costs, a lower debt rating
could also reduce Credcos borrowing capacity in the unsecured term debt and
commercial paper markets.

Credco does
not believe its commercial paper and term debt pricing were adversely affected
by the ratings actions in 2009; however, it is difficult to draw conclusions
given the severe market disruptions and the unprecedented intervention of the
U.S. government in the capital markets since the second half of 2008. The
overall level of the funding provided by Credco to the Banks and other American
Express subsidiaries is impacted by a variety of factors, among them Credcos
ratings. To the extent Credco is subject to a higher cost of funds, whether due
to an adverse ratings action or otherwise, the Banks and Credcos other
affiliates could continue to use, or could increase their use of, alternative
sources of funding for their receivables that offer better pricing.

Short-term Funding Programs

Credcos
primary short-term funding program, the issuance and sale of commercial paper,
is used mainly to meet working capital needs, such as managing seasonal
variations in receivables balances. Short-term borrowing, particularly
commercial paper, decreased significantly during 2009 as part of the change in
Credcos funding mix. The amount of short-term borrowing issued in the future
will depend on Credcos funding strategy, its needs and market conditions.
As of December 31, 2009, Credco had $1.0 billion of commercial
paper outstanding and average commercial paper outstanding was $2.0 billion and
$10.8 billion in 2009 and 2008, respectively.

29

Based on the
maximum available borrowings under committed third party bank credit facilities
and investment
securities, Credcos total liquidity coverage of net short-term borrowings was
in excess of 100 percent as of December 31, 2009 and 2008, respectively.

In 2008, the
Federal Reserve Board established the Commercial Paper Funding Facility (CPFF),
which provided three months of liquidity to U.S. issuers of commercial paper
through a special purpose vehicle. The CPFF program expired on February 1,
2010. Under current market conditions, Credco does not expect the expiration of
the CPFF program to have any material impact on Credcos business or funding
positions. However, if the unprecedented levels of volatility and disruptions
in capital markets reemerge, the lack of government supported
liquidity programs, such as CPFF, could negatively impact Credcos funding
capabilities.

The following
table presents select statistics regarding Credco commercial paper outstanding
for each of the quarters for the years ended December 31, 2009, 2008 and 2007:

Outstanding Balance ($ Billion) as of:

Period

Ending

Average

Minimum

Maximum

Q107

5.5

7.2

5.2

9.9

Q207

7.9

7.0

5.3

9.0

Q307

9.0

8.4

6.8

9.8

Q407

10.5

8.6

7.5

10.5

Q108

14.1

11.6

10.3

14.1

Q208

12.6

13.2

11.5

14.7

Q308

9.2

10.9

9.2

12.1

Q408(a)

7.3

7.3

4.4

9.0

Q109

1.8

3.7

1.4

7.4

Q209

1.4

1.5

1.2

2.0

Q309

1.1

1.1

0.9

1.3

Q409

1.0

0.8

0.6

1.1

(a)

Includes $4.5 billion under
the CPFF as of December 31, 2008, which was also the maximum balance under the CPFF. Credco
has not issued commercial paper to the CPFF since November 4, 2008, and had
no commercial paper outstanding under the CPFF since March 30, 2009.

Long-term Debt Programs

Long-term debt
is raised through the offering of debt securities in the United States and
international capital markets. Long-term debt is generally defined as any debt
with an original maturity greater than 12 months.

30

Credco had the
following long-term debt outstanding as of December 31:

(Billions)

2009

2008

Long-term
debt outstanding

$

19.5

$

20.0

Average
long-term debt

$

18.8

$

21.2

See further
details on total year-end stated rates on debt and maturities in Note 6 to the
Consolidated Financial Statements.

Credco has the
ability to issue debt securities under shelf registrations filed with the SEC.
The shelf registration statement filed with the SEC is for an unspecified
amount of debt securities to be issued. On August 25, 2009, Credco successfully
issued $1.5 billion of non-guaranteed fixed-rate senior unsecured debt from its
U.S. shelf registration. In addition, Credco re-entered the Retail Note market
in December 2009, with issues totaling $79 million. As of December 31, 2009 and
2008, Credco had $11.1 billion and $13.0 billion, respectively, of debt
securities outstanding, issued under the SEC registration statement.

Credco, in
conjunction with certain subsidiaries of American Express, has established a
program for the issuance of debt instruments outside the United States, which
is listed on the Luxembourg Stock Exchange. The maximum aggregate principal
amount of debt instruments outstanding at any one time under the program cannot
exceed $50.0 billion. In the fourth quarter of 2009, Credco successfully
accessed the United Kingdom unsecured debt markets under this program and
issued £750 million (approximately $1.2 billion) of senior unsecured debt. As of
December 31, 2009, $2.6 billion was outstanding under this program, of which
$2.1 billion was issued by Credco. As of December 31, 2008, $3.7 billion was
outstanding under this program, of which $2.4 billion was issued by Credco.

Credco has
also established a program in Australia for the issuance of debt securities of
up to approximately $5.4 billion. During 2009, no notes were issued under this
program. As of December 31, 2009 and 2008, approximately $4.6 billion and $3.5
billion, respectively, was available for issuance under this program.

As of December 31, 2009, Credco
maintained a shelf registration in Canada for a medium-term note program
providing for the issuance when necessary of up to approximately $3.4 billion
of notes by American Express Canada Credit Corporation (CanCredco), an indirect
wholly owned subsidiary of Credco. All notes issued under this shelf
registration are guaranteed by Credco. During 2009, Credco successfully
accessed the Canadian unsecured debt markets and issued CAD950 million
(approximately $913 million) of senior unsecured debt. The financial results of
CanCredco are included in the consolidated financial results of Credco.

The most
restrictive limitation on Credcos ability to pay dividends to its parent
imposed by the covenants of debt instruments issued by Credco is the
requirement that Credco maintain a minimum consolidated net worth of $50
million. During 2009 and 2008, Credco paid cash dividends of $400 million and
$580 million, respectively, to TRS. These payments did not violate any covenants.
There are no significant covenant restrictions on the ability of Credco to obtain
funds from its subsidiaries by dividend or loan. Additionally, there are no limitations
on the amount of debt that can be issued by Credco, provided it maintains the minimum required fixed charge coverage ratio of 1.25.

Liquidity Strategy

Credco seeks
to ensure that it has adequate liquidity in the form of cash and cash
equivalents and readily-marketable securities easily convertible into cash, as
well as access to additional cash and cash equivalents through intercompany
borrowing arrangements to satisfy all maturing funding obligations for a period
of 12 months, in addition to having access to significant additional contingent
liquidity sources. This objective is managed by regularly accessing capital
through a broad and diverse set of funding programs, by maintaining a portfolio
of cash and readily-marketable securities, as well as a variety of contingent
sources of cash and financing. Credco maintains a liquidity plan that enables
it to continuously meet its financing

31

obligations
even when access to its primary funding sources become impaired or markets
become inaccessible.

In addition to
its cash and readily-marketable securities, Credco continues to maintain a
variety of contingent liquidity resources, such as access to securitizations
of cardmember receivables through sales of receivables to TRS for securitization
by RFC V and AEIT.

The yield Credco receives on its cash
and readily-marketable securities is generally less than the interest expense
on the sources of funding for these balances. Thus, Credco incurs substantial
net interest cost on these amounts. The level of net interest costs will be
dependent on the size of its cash and readily-marketable securities holdings,
as well as the difference between its cost of funding these amounts and their
investment yields.

Cash and Readily-Marketable Securities

As of December
31, 2009, Credco had cash and cash equivalents of approximately $0.3 billion as
well as $2.0 billion of readily-marketable securities. These investments are of
high credit quality and are highly liquid short-term instruments and
longer-term, U.S. Treasury securities and government-sponsored enterprise debt.
These instruments are managed to either mature prior to the maturity of
borrowings that will occur within the next 12 months, or are sufficiently
liquid that Credco can sell them or enter into sale/repurchase agreements to
immediately raise cash proceeds to meet liquidity needs. In addition to its
actual holdings of cash and readily marketable securities, Credco maintains
access to additional liquidity, in the form of cash and cash equivalents held
by certain affiliates, through intercompany loan agreements.

Committed Bank Credit Facilities

Credco
maintained the following committed bank credit facilities as of December 31,
2009:

(Billions)

American
Express

Credco

Total

Committed(a)

$

1.3

$

10.1

(b)

$

11.4

Outstanding



$

3.2

$

3.2

(a)

Committed lines were
supplied by 34 financial institutions as of year-end. However, effective
January 20, 2010, the agreements in which Aurora Bank FSB (previously Lehman
Brothers Bank FSB) participated were amended and their participation waived.
This reduced the total committed lines by $147 million.

(b)

Credco has the right to
borrow a maximum amount of $11.4 billion with a commensurate maximum $1.3
billion reduction in the amount available to American Express.

Credcos
committed bank credit facilities expire as follows:

(Billions)

2010

$

1.9

2011

2.8

2012

6.7

Total

$

11.4

32

The
availability of the credit lines is subject to Credcos compliance with certain
financial covenants that require maintenance of a 1.25 ratio of combined
earnings and fixed charges to fixed charges. The ratio of earnings to fixed
charges for Credco and American Express was as follows:

Credco

American
Express

2009

1.59

2.22

2008

1.62

1.96

2007

1.38

2.24

Committed bank
credit facilities do not contain material adverse change clauses, which may
preclude borrowing under the credit facilities. Additionally, the facilities
may not be terminated should there be a change in Credcos credit rating.

In
consideration of all the funding sources, Credco believes that it would have
the liquidity to satisfy all maturing funding obligations for at least a
12-month period in the event that access to the secured and unsecured fixed
income capital markets is completely interrupted for that length of time. These
events are not considered likely to occur.

Results of Operations

Pretax income
depends primarily on the volume of cardmember receivables and loans purchased,
the discount factor used to determine purchase price, the relationship of the
total discount to Credcos interest expense, interest earned on our investments
and other interest-earning loans and the collectibility of cardmember
receivables and loans purchased.

Credcos
consolidated net income decreased 58 percent to $362 million for the year ended
December 31, 2009, as compared to $864 million for the year ended December 31,
2008. The year-over-year decrease was primarily due to a decrease in discount
revenue as a result of decreased purchases of cardmember receivables,
interest earned on investments and interest earned on loans to affiliates.

33

The following table
summarizes the changes attributable to the (decrease) increase in key revenue
and expense accounts:

Discount revenue decreased
70 percent or $1.5 billion to $652 million for 2009, as compared to $2.2
billion in 2008, due to a decrease in both the volume of receivables and loans
purchased and discount rates. Volume of receivables and loans purchased for
2009 decreased 51 percent from $242 billion in 2008 to $118 billion, primarily
due to the amendment of the Receivables Agreements between each of Credco and
Centurion Bank and FSB; purchased volume does not include those cardmember
receivables transferred with recourse to Credco and cardmember receivables and
loans funded by loans to affiliates. Discount rates as of year-end 2009, which
vary over time due to changes in market interest rates or changes in the
collectibility of cardmember receivables, decreased an average of approximately
35 basis points from 0.92 percent in 2008 to 0.57 percent in 2009.

Interest Income from Affiliates

Interest income from
affiliates decreased 42 percent or $312 million to $432 million in 2009, as
compared to $744 million in 2008. The year-over-year decrease is due to a
decrease in both the interest rates charged to affiliates and, to a lesser
extent, the volume of loans to affiliates. The average volume of loans to
affiliates decreased partially due to decreases in loans to the Banks, as a
consequence of amending the Receivables Agreements. The average interest rate
charged to affiliates decreased 222 basis points from 6.18 percent in 2008 to
3.95 percent in 2009.

Interest Income from Investments

Interest income from
investments decreased 66 percent or $164 million to $83 million for 2009, as
compared to $247 million for 2008. The year-over-year decrease is due to a 194
basis point decline in the

34

average interest rate on the
total investment portfolio to 0.9 percent for 2009, as compared to 2.9 percent
in 2008, due to the maturity of $1 billion of U.S. Treasury securities in 2009.

Other Revenues

Other revenues decreased
from $203 million for the year ended 2008 to $2 million for the year ended
2009, primarily as a result of the change in value of foreign exchange forward
contracts.

Provisions for Losses

The provisions for losses
decreased 67 percent or $427 million to $214 million for 2009, as compared to
$641 million for 2008. The year-over-year decrease primarily reflects the
reduction in the average outstanding receivables balance and improvement in credit performance. The average outstanding receivables reduced as result of decline in purchases from the Banks due to the amendment of the Receivables
Agreements previously discussed.

Interest Expense

Interest expense decreased
57 percent or $775 million to $588 million for 2009 as compared to $1,363
million for 2008, due to a decrease in average debt outstanding and lower
interest rates. The average interest rate on debt outstanding during 2009 was
139 basis points lower than 2008 from 4.24 percent to 2.85 percent in 2009.

Interest Expense to Affiliates

Interest expense to
affiliates decreased 84 percent or $214 million to $41 million for 2009 as
compared to $255 million for 2008, due to lower interest rates and a decrease
in average debt outstanding. The average rate due to affiliates during 2009 was
241 basis points lower than 2008, from 2.89 percent to 0.48 percent in 2009.

Service Fees to Affiliates

Credco is charged a servicing fee by certain affiliates (primarily the Banks) for the
servicing of receivables purchased. Credco recognizes the servicing fees it
incurs in service fees to affiliates in its Consolidated Statements of Income.
Servicing fees of $1 million and $173 million were incurred for 2009 and 2008,
respectively, of which the 2008 servicing fees primarily related to the
agreement with the Banks. Due to the amendment of the receivables agreements in
2008, Credco did not purchase any receivables from the Banks during 2009.
Certain other affiliates do not explicitly charge Credco a servicing fee for the
servicing of receivables purchased. Instead Credco receives a lower discount
rate on the receivables sold to Credco than would be the case if servicing fees
were charged explicitly, as the discount rate on receivables purchased by Credco
is adjusted to generate income for Credco that is sufficient to maintain its
minimum fixed charge coverage ratio. If a servicing fee were charged by these
other affiliates from which Credco purchases receivables, servicing fees to
affiliates would have been higher by approximately $126 million and $152 million
for the years ended December 31, 2009 and 2008, respectively. Correspondingly,
discount revenue would have increased by approximately the same amounts in those
years.

Income Taxes

Credcos effective tax rate
for the years ended December 31, 2009 and 2008 was 2.2 percent and 13.3
percent, respectively. The tax rates for these years reflect recurring
permanent tax benefits in relation to the level of pretax income.

35

Item 7A.

QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Credcos risk
management objective is to identify, monitor and appropriately control its risk
exposures. Credcos risk management oversight is performed through internal
and independent oversight functions. Risk management governance at Credco begins
with the American Express Board approved American Express Enterprise-wide
Risk Management Policy, which defines risk management objectives, risk
appetite, risk limits and escalation triggers, and establishes the internal
governance structure for managing risk. The Policy focuses on the major risks
that are relevant to American Express and Credco 
credit risk, operational risk, market risk and reputational risk. Management
committees, including the Enterprise Risk Management Committee (ERMC), chaired
by American Express Chief Risk Officer, and the Asset-Liability Committee
(ALCO), chaired by American Express Chief Financial Officer, are responsible
for implementing policies for managing these risks across American Express,
including Credco.

Credit Risk Management Process

Credit risk is
defined as the risk of loss due to obligor or counterparty default. TRS manages
the overall credit risk exposure associated with the cardmember receivables and
loans purchased by Credco. Credit risk is defined as the risk of loss from an obligor
or counterparty default. Credco is exposed to credit risk through the
cardmember receivables and cardmember loans it purchases generally without
recourse, as well as through its participation interests. Since such a
portfolio consists of millions of borrowers and individual exposures across
multiple geographies, occupations, and social segments, its risk is reduced
through diversification. A loss distribution is characterized by a higher
frequency but manageable severity that is more closely linked to general
economic and legal conditions than by borrower-specific events. Receivable and
loan purchase decisions and the related discount pricing are impacted by the
overall credit risk considerations inherent in the cardmember receivables and
cardmember loans.

Credit risk
associated with Credcos derivatives is limited to the risk that a derivative
counterparty will not perform in accordance with the terms of the contract. To
mitigate such risk, Credcos counterparties are all required to be rated as investment
grade. Additionally, Credco enters into master netting agreements with its
counterparties wherever practical.

Market Risk Management Process

Market risk is
the risk to earnings or value resulting from movements in market prices.
Credcos market risk exposure is primarily generated by:



Interest
rate risk in its funding activities; and



Foreign
exchange risk in its international operations.

General
principles and the overall framework for managing market risk across American
Express are defined in the Market Risk Policy, which is the responsibility of
the ALCO. Market Risk limits and escalation triggers within that policy are
approved by ALCO and by the ERMC. Market risk is centrally monitored for
compliance with policy and limits by the Market Risk Committee, which reports
into the ALCO and is chaired by the Chief Market Risk Officer. Market risk
management is also guided by policies covering the use of derivative financial
instruments, funding and liquidity and investments. Derivative financial
instruments derive their value from an underlying variable or multiple
variables, including interest rate, foreign exchange, and equity indices or
prices. These instruments enable end users to increase, reduce or alter
exposure to various market risks and, for that reason, are an integral
component of American Express market risk management. Use of derivative
financial instruments is incorporated into the discussion below as well as Note
8.

Interest rate
exposure within Credcos charge card and fixed-rate lending products is managed
by varying the proportion of total funding provided by short-term and variable-rate
debt compared to fixed-rate debt. In

36

addition,
interest rate swaps are used from time to time to effectively convert
fixed-rate debt to variable-rate or to convert variable-rate debt to
fixed-rate. Credco may change the mix between variable-rate and fixed-rate
funding based on changes in business volumes and mix, among other factors.

Credco
regularly reviews its interest rate exposure profile and may modify it.
Derivative financial instruments, primarily interest rate swaps, with notional
amounts of approximately $8 billion were outstanding as of December 31,
2009 and 2008, respectively. These derivatives generally qualify for hedge
accounting. A portion of the derivatives outstanding as of December 31,
2009 extend to 2015. Credco does not engage in derivative financial instruments
for trading purposes.

Given the
nature of Credcos business model, where Credco includes its costs of funding
in the calculation of the discount at which Credco offers to purchase
receivables, and where such discount is further adjusted to maintain Credcos
required minimum fixed charge coverage ratio of 1.25, there would be minimal
detrimental effect on Credcos pretax earnings of a hypothetical 100 basis
point increase in interest rates.

Foreign
exchange risk is generated by funding foreign currency cardmember receivables
and loans in U.S. dollars, foreign subsidiary equity and foreign currency
earnings in international units. Credco hedges this market exposure to the
extent it is economically justified through various means, including foreign
currency funding and the use of derivative financial instruments such as
foreign exchange forwards and cross-currency swap contracts, which can help
lock in the value of Credcos exposure to specific currencies.

As of
December 31, 2009 and 2008, foreign currency hedge instruments with total
notional amounts of approximately $6 billion and $5 billion, respectively, were
outstanding. Derivative hedging activities related to balance sheet exposures
and foreign currency earnings generally do not qualify for hedge accounting;
however, derivative hedging activities related to translation exposure of
foreign subsidiary equity generally do.

With respect
to foreign currency exposures, including related foreign exchange forward
contracts and swaps outstanding, the effect on Credcos earnings of a
hypothetical 10 percent change in the value of the U.S. dollar would be
immaterial as of December 31, 2009.

Funding and Liquidity Risk Management
Process

Funding and
liquidity risk is defined as the inability to access cash and equivalents
needed to meet business requirements and satisfy Credcos obligations. General
principles and the overall framework for managing liquidity risk across
American Express are defined in the Liquidity Risk Policy, which is the
responsibility of the ALCO. Credco balances the trade-offs between maintaining
too much liquidity, which can be costly and limit financial flexibility, with
having inadequate liquidity, which may result in financial distress during a
liquidity event. Liquidity risk is centrally managed by the Funding and
Liquidity Committee, which reports into the ALCO and is chaired by the
Corporate Treasurer. American Express has developed a liquidity plan that
enables it to meet its daily cash obligations when access to both unsecured and
secured funds in the debt capital markets is impaired or unavailable. This plan
is designed to ensure that Credco and all of its main operating entities could
continuously meet their maturing debt obligations for a 12-month period if
access to all capital markets is interrupted.

Liquidity risk
is managed both at an aggregate company level and at the major legal entities
in order to ensure that sufficient funding and liquidity resources are
available in the amount and in the location needed in a stress event. The
Funding and Liquidity Committee manages the forecasts of American Express
aggregate and Credco cash positions and financing requirements and the funding
plans designed to satisfy those requirements under normal conditions,
establishes guidelines to identify the amount of liquidity resources required,
and monitors positions and determines any actions to be taken. Liquidity
planning also takes into account operating cash flexibilities.

37

Operational Risk Management Process

Operational
risk is the risk of not achieving business objectives due to inadequate or
failed processes or information systems, human error or the external
environment (e.g., natural disasters) including losses due to failures to
comply with laws and regulations. Operational risk is inherent in all business
activities and can impact an organization through direct or indirect financial
loss, brand damage, customer dissatisfaction, or legal or regulatory penalties.
Current areas of significant focus include data protection, anti-money
laundering, and vendor risk, impact of organizational change, financial
reporting risk and both internal and external fraud.

The general
principles and the overall framework for managing operational risk across
American Express are defined in the Operational Risk Policy approved by the
ERMC. The Operational Risk Management Committee (ORMC) provides governance for
the operational risk framework.

In order to
appropriately measure operational risk, American Express has developed a
comprehensive operational risk model. This model assesses (i) risk events,
i.e., what occurred or could have occurred; (ii) root causes, i.e., why
did it occur or could have occurred; and (iii) impact. Any impacts are
assessed from a financial, brand, regulatory and legal perspective. The operational
risk model also assesses the frequency and likelihood that events may occur again
so that the appropriate mitigation steps may be taken.

The
operational risk framework also includes the entity risk self-assessment. This
is a risk workshop where senior leaders identify the key operational risks that
the business unit or support group faces and determines preparedness to
respond should these risks occur. Top risks are tracked to ensure that the
appropriate monitoring or mitigation is in place. The day-to-day management of
operational risk lies with Credco.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not
applicable.

Item 9A(T).

CONTROLS AND PROCEDURES

Credco maintains disclosure
controls and procedures that are designed to ensure that information required
to be disclosed in the reports filed or submitted under the Securities Exchange
Act of 1934, as amended (the Exchange Act), is recorded, processed,
summarized, and reported within the time periods specified in the SECs rules
and forms. Disclosure controls and procedures are designed to ensure that
information required to be disclosed by Credco in its Exchange Act reports is
accumulated and communicated to Credcos management including its principal
executive and financial officers, as appropriate, to allow timely decisions
regarding required disclosure.

Credcos management, with
the participation of Credcos Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of Credcos disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) as of the end of the period covered by this report. Based on such
evaluation, Credcos Chief Executive Officer and Chief Financial Officer have
concluded that Credcos disclosure controls and procedures were not effective
as of December 31, 2009 due to the material weaknesses identified and described
below.

Managements Report on Internal Control over Financial
Reporting

The management of Credco is
responsible for establishing and maintaining adequate internal control over
financial reporting. Credcos internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles in the
United States of America, and includes those policies and procedures that:



Pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of Credco;



Provide reasonable
assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of Credco are being made only
in accordance with authorizations of management and directors of Credco; and



Provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of Credcos assets that could have a material
effect on the financial statements.

Because of its inherent
limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

39

Credcos management assessed
the effectiveness of Credcos internal control over financial reporting as of
December 31, 2009. In making this assessment, Credcos management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Controls  Integrated Framework. Based on
managements assessment and those criteria, management has concluded that, as
of December 31, 2009, Credcos internal control over financial reporting was
not effective because of the material weaknesses described below. A material
weakness is a deficiency, or combination of deficiencies, in internal control
such that there is a reasonable possibility that a material misstatement of the
registrants annual or interim financial statements will not be prevented or
detected on a timely basis.

As disclosed previously,
Credco restated its financial statements and filed an amended Annual Report on
Form 10-K/A for the fiscal year ended December 31, 2008, and amended Quarterly
Reports on Form 10-Q/A for the periods ended March 31 and June 30, 2009. The
restatement was to correct errors in the translation of foreign currency
balances related to an investment in a consolidated foreign subsidiary. These
errors were discovered by management in the third quarter of 2009 in connection
with its preparation for the maturity of debt related to the investment, and
brought immediately to the attention of the internal and external auditors,
prior to the preparation of Credcos financial statements for the third quarter
of 2009. These errors resulted in:



Incorrect transaction
losses of $135 million being recorded in Other Revenues in the Consolidated
Statements of Income from September 2007 through June 2009; and



Corresponding incorrect
credits in Foreign Currency Translation Adjustments (FCTA) in Accumulated
Other Comprehensive Income (Loss) in the Consolidated Balance Sheets over the
same period.

Following a review of its
controls and processes for recording and monitoring its investments in
consolidated foreign subsidiaries, Credcos management has determined that it
did not maintain effective controls over processes to accurately record and
subsequently monitor certain of its investments in consolidated foreign
subsidiaries with funding structures similar to the structure in which the
error occurred. This deficiency resulted in restatements of the financial
statements for the fiscal years ended December 31, 2008 and 2007, including
each of the quarterly periods in fiscal year 2008 and the third and fourth
quarters in fiscal year 2007, and for the first and second quarters in 2009.
Accordingly, Credcos management concluded that this deficiency constitutes a
material weakness.

Additionally, Credco has
filed an amendment to its Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2009 (the Third Quarter 2009 Form 10-Q/A) to
restate its Consolidated Statement of Cash Flows for the nine months then
ended. This restatement is to correct an overstatement of cash flows from
investing activities and an equal and offsetting understatement of cash flows
from operating activities, as further explained below. This restatement does
not impact Credcos previously reported overall net change in cash and cash
equivalents in its Consolidated Statement of Cash Flows, or Credcos
Consolidated Balance Sheet or Consolidated Statement of Income, for the period
presented.

The restatement is the
result of a correction of a manual error in the classification of cash flows
pertaining to amounts Due from Affiliates. The error resulted from an incorrect
identification of cash flows between investing and operating activities from
transactions between Credco and its affiliates. As a result, a cash outflow from
investing activities was inadvertently recorded as a cash inflow, with an equal
and offsetting error in cash flow from operating activities. The error resulted
in an overstatement of cash from investing activities of $3.9 billion and an
understatement of cash from operating activities of $3.9 billion. The error
corrected in the Third Quarter 10-Q/A was identified by management in the
course of preparing the Consolidated Statement of Cash Flows for Credcos 2009
Annual Report on Form 10-K, and brought immediately to the attention of the
internal and external auditors. As part of the remediation activities for the
material weakness identified in the third quarter of 2009, more senior
personnel have been deployed to the accounting and control processes of Credco.

Following a further review
of its controls and processes, Credcos management has determined that it did
not maintain effective controls over the preparation and review of its
Consolidated Financial Statements. Accordingly, Credcos management concluded
that this deficiency constitutes a second material weakness.

40

Credco is a non-accelerated
filer under applicable SEC rules and elected deferral under item 308T of
Regulation S-K. As such, this annual report does not include an attestation
report by PricewaterhouseCoopers LLP, Credcos independent registered public
accounting firm, regarding internal control over financial reporting.
Managements report was not subject to attestation by Credcos independent
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit Credco to provide only managements report
in this annual report.

Pursuant to Item 308T(a) of
Regulation S-K, this Managements Report on Internal Control Over Financial
Reporting shall not be deemed to be filed for purposes of Section 18 of the
Exchange Act or otherwise subject to the liabilities of that section.

Remediation Steps to Address Material Weaknesses in Internal
Controls

Credco has reviewed its
processes and controls for recording and monitoring its investments in consolidated
foreign subsidiaries and has determined that the error described above was limited
to a discrete number of similar transactions (specifically three funding
structures related to its investments in certain consolidated foreign subsidiaries).
Credco has performed a detailed review of each of these investment funding
structures and has determined there have been no other errors in accounting for
them. To address the control deficiency described above, Credco instituted the
following new controls:

1.

Crosstraining of Credco
accounting personnel and introduction of more senior personnel to the
accounting and control processes;

2.

Enhanced cross-functional
review of foreign currency exposures;

3.

Quarterly monitoring of
funding structures related to its investments in foreign subsidiaries to
ensure they are being properly accounted for at inception, post-inception and
upon maturity;

4.

Redesign of the account
reconciliation process for FCTA;

5.

Enhanced monitoring of
control effectiveness by American Express internal control specialists; and

6.

Reinforcement of the
requirement for new, similar transactions to be escalated for senior level
and subject matter expert review.

Controls 1 and 5 above apply
broadly to Credcos process of preparing and reviewing its financial
statements, and were instrumental in discovering the error being corrected in
the Third Quarter 2009 Form 10-Q/A. In addition to these controls, Credco is
implementing the following additional controls:



Improving the spreadsheet
controls for the preparation of the Consolidated Financial Statements;



Developing refreshed
training for preparers and reviewers of financial statement items; and



Enhancing managements
review and analysis of key financial statement items, footnotes, and
disclosures, including formal documentation of composition and trend analysis
for all financial statement line items.

Based on the foregoing, management believes that, as of the filing
date of this Form 10-K, the consolidated financial statements included herein
fairly present, in all material respects, our financial condition, results
of operations and cash flows for the periods presented. Testing
of the effectiveness of the recently instituted controls is ongoing. As a
result, Credcos management
believes the material weaknesses have not yet been fully remediated.

Changes in Internal Control over Financial Reporting

There were
changes to Credcos internal control over financial reporting relating
to remediation measures as described above that occurred during the fourth
quarter ended December 31, 2009 and through the date of this filing that
would have a material effect, or are reasonably likely to have a material
effect, on Credcos
internal control over financial reporting.

The Audit
Committee of the Board of Directors of American Express Company has appointed
PricewaterhouseCoopers LLP as the independent registered public accounting
firm to audit the Consolidated Financial Statements of Credco for the year
ended December 31, 2009.

Each year the Audit
Committee reviews the accountants qualifications, performance and
independence in accordance with regulatory requirements and guidelines. At
least every ten years, the Audit Committee charter requires a detailed review
of American Express accounting firm, which would include a comparison of
resources available in other firms. The Committee conducted such a review in
2004, resulting in the appointment of PricewaterhouseCoopers LLP as the
independent registered public accounting firm for Credco for the year
beginning January 1, 2005.

Audit Fees

The
aggregate fees billed or to be billed by PricewaterhouseCoopers LLP for
professional services rendered for the audit of Credcos Consolidated Financial
Statements and services that were provided in connection with statutory and
regulatory filings or engagements and other attest services were $439,413 and
$300,913 for the years ended December 31, 2009 and 2008, respectively.

Audit-Related
Fees

Credco was
not billed by PricewaterhouseCoopers LLP for any fees for audit-related
services for 2009 or 2008.

Tax Fees

Credco was
not billed by PricewaterhouseCoopers LLP for any tax fees for 2009 or 2008.

All Other
Fees

Credco was not
billed by PricewaterhouseCoopers LLP for any other fees for 2009 or 2008.

42

Policy on Pre-Approval of Services Provided
by Independent Registered Public Accountants

Pursuant to
the requirements of the Sarbanes-Oxley Act of 2002, the terms of the
engagement of Credcos independent registered public accounting firm is
subject to the specific pre-approval of the Audit Committee of American
Express. All audit and permitted non-audit services to be performed by
Credcos independent registered public accounting firm require pre-approval
by such Audit Committee in accordance with its pre-approval procedures. All
such services provided by Credcos independent registered public accounting
firm have been pre-approved. The procedures require all proposed engagements
of Credcos independent registered public accounting firm for services
to Credco of any kind to be directed to the General Auditor of American Express
and then submitted for approval to the Audit Committee of American Express
prior to the beginning of any services.

Other
Transactions with PricewaterhouseCoopers LLP

American
Express has a number of business relationships with individual member firms
of the worldwide PricewaterhouseCoopers LLP organization. American Express
subsidiaries provide card and travel services to some of these firms and
these firms pay fees to American Express subsidiaries. These services are in
the normal course of business and American Express provides them pursuant to
arrangements that American Express offers to other similar clients.

43

PART IV

Item 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)

1.

Financial
Statements:

See Index to
the Financial Statements at page F-1 hereof.

2.

Exhibits:

See Exhibit
Index hereof.

44

SIGNATURES

Pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

AMERICAN EXPRESS CREDIT CORPORATION(Registrant)

DATE: March 31, 2010

By

/s/ David L. Yowan

David L. Yowan

Chief Executive Officer

Pursuant to
the requirement of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities on the dates indicated.

To the Board of Directors and Shareholder of
American Express Credit Corporation

In our opinion, the consolidated financial statements
listed in the accompanying index present fairly, in all material respects, the
financial position of American Express Credit Corporation and its subsidiaries
(the Company) at December 31, 2009 and 2008, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2009 in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

American
Express Credit Corporation (Credco), together with its subsidiaries, is a
wholly-owned subsidiary of American Express Travel Related Services Company,
Inc. (TRS), which is a wholly-owned subsidiary of American Express Company
(American Express).

Credco is
engaged in the business of financing non-interest-bearing cardmember
receivables arising from the use of the American Express® Card, the
American Express® Gold Card, Platinum Card®, Corporate
Card and other American Express cards issued in the United States, and in
certain countries outside the United States. Credco also finances certain
interest-bearing and discounted revolving loans generated by cardmember
spending on American Express credit cards and issued in non-U.S. markets,
although interest-bearing and revolving loans are primarily funded by
subsidiaries of TRS other than Credco. American Express charge cards and
American Express credit cards are collectively referred to herein as the Card.

In October
2008, as part of American Express strategy to increase its flexibility in
funding U.S. consumer and small business charge card receivables, Credco and
both American Express Centurion Bank (Centurion Bank) and American Express
Bank, FSB (FSB) (together, the Banks) mutually agreed to amend their respective
Receivables Agreements. The previous agreements called for the Banks, which
issue American Express U.S. consumer and small business charge cards, to sell
all unsecuritized receivables related to spending on those cards to Credco. The
amended agreements will give the Banks the flexibility, from time to time, to
sell the receivables to Credco or to retain the receivables and fund them from
their own sources. However, the amended agreements require the Banks to sell
either all or none of their charge card receivables to Credco at any given
time. The Banks, therefore, may not direct receivables with particular risk
characteristics for sale to Credco. The arrangements between Credco and the Banks have no impact on
Credcos funding of U.S. Corporate Card charge receivables and charge card
receivables outside the United States.

American Express provides Credco with financial support with
respect to maintenance of its minimum overall 1.25 fixed charge coverage
ratio, which is achieved by adjusting the discount rates on the purchases
of receivables Credco makes from, and the interest rates on the loans Credco
provides to, TRS and other American Express subsidiaries. Each monthly period,
the discount and interest rates are adjusted to generate income for Credco
that is sufficient to maintain its minimum fixed charge coverage ratio.

Principles of Consolidation

The
Consolidated Financial Statements of Credco are prepared in conformity with
U.S. generally accepted accounting principles (GAAP). All significant
intercompany transactions are eliminated.

Credco
consolidates all voting interest entities in which Credco holds a controlling
financial interest through which Credco is able to exercise control over those
entities operating and financial decisions. Entities in which the Credcos
voting interest does not provide Credco with control, but allows Credco to
exert significant influence over their financial and operating decisions, are
accounted for under the equity method. All other investments in equity
securities, to the extent that they are not considered marketable securities,
are accounted for under the cost method.

Investments
with variable interest entities (VIEs) are limited. Credco consolidates any
VIEs for which it is considered to be the primary beneficiary. The
determination of whether an entity is a VIE is based on the amount and
characteristics of the entitys equity. An enterprise is required to
consolidate a VIE when it has a variable interest for which it is deemed to be
the primary beneficiary; that is, it will absorb a majority of the VIEs
expected losses or receive a majority of the VIEs expected residual returns.
Credcos involvement with VIEs is comprised of one entity established to fund
loans to affiliates in an international market. Credco is considered the
primary beneficiary of this entity and consolidates it accordingly.

Certain
reclassifications of prior year amounts have been made to conform to the
current presentation.

Assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
based upon exchange rates prevailing at the end of each year. The resulting
translation adjustments, along with any related qualifying hedge and tax
effects, are included in accumulated other comprehensive (loss) income, a
component of shareholders equity. Translation adjustments, including
qualifying hedge and tax effects, are reclassified to earnings upon the sale or
substantial liquidation of investments in foreign operations. Revenues and
expenses are translated at the average month-end exchange rates during the
year. Gains and losses resulting from the remeasurement of assets and
liabilities denominated in a non-functional currency net of related hedges are
reported net in other revenue or other expense, depending on the nature of the
activity, in Credcos Consolidated Statements of Income. Net non-functional
currency transaction gains (losses) were immaterial for the years ended 2009,
2008 and 2007.

Amounts Based on Estimates and Assumptions

Accounting
estimates are an integral part of the Consolidated Financial Statements. These
estimates are based, in part, on managements assumptions concerning future
events. Among the more significant assumptions are those that relate to
reserves for cardmember losses, fair value measurement and income taxes. These
accounting estimates reflect the best judgment of management, but actual
results could differ.

Discount Revenue

Credco earns
discount revenue from purchasing cardmember receivables and loans at a discount
to par value. The discount is deferred and recognized as revenue over the
period that the receivables are estimated to be outstanding. Estimates are
based on the recent historical average life of cardmember receivables.

Finance Revenue

Cardmember
lending finance revenues are assessed using the average daily balance method
for loans owned and are recognized based upon the loan principal amount
outstanding in accordance with the terms of the applicable account agreement
until the outstanding balance is paid or written-off.

Interest Income from Affiliates

Interest
income from affiliates is earned on interest-bearing loans made by Credco to
affiliates. Interest income is accrued primarily using the average daily
balance method on loans owned and is recognized based on the outstanding loan
principle amount and interest rates specified in the agreements until the
outstanding loan balance is paid.

Interest Income from Investments

Interest
income for Credcos performing fixed-income securities is accrued as earned
using the effective interest method, which adjusts the yield for security
premiums and discounts, fees and other payments, so that a constant rate of
return is recognized on the securitys outstanding balance. These amounts are
recognized until such time as a security is in default or when it is likely that
future interest payments will not be made as scheduled.

Cash and Cash Equivalents

Cash and cash
equivalents include cash and amounts due from banks, interest-bearing bank
balances, and other highly liquid investments with original maturities of 90
days or less.

The following
table identifies Credcos other significant accounting policies, the Note and
page where a detailed description of each policy can be found.

Significant Accounting Policy

Note
Number

Note Title

Page

Fair Value Measurements

Note
2

Fair
Values

F-9

Cardmember Receivables and
Loans

Note
3

Cardmember
Receivables and Loans

F-13

Reserves for Losses 
Cardmember Receivables and Loans

Note
3

Cardmember
Receivables and Loans

F-14

Investment Securities

Note
4

Investment
Securities

F-15

Derivative Financial
Instruments and Hedging Activities

Note
8

Derivatives
and Hedging Activities

F-18

Income Taxes

Note
13

Income
Taxes

F-26

Recently Issued Accounting Standards

The Financial
Accounting Standards Board (FASB) recently issued the following accounting
standards, which are effective beginning January 1, 2010. The adoption of the
accounting standards listed below will not have a material impact on Credcos
financial position or results of operations and Credco will continue to
consolidate its VIE subsequent to the adoption of the standards.



Accounting
Standards Update (ASU) No. 2009-16, Transfers and Servicing (Topic 860): Accounting
for Transfers of Financial Assets: An amendment for accounting for transfers
of financial assets will eliminate the concept of a qualifying special
purpose entity (QSPE), therefore requiring these entities to be evaluated
under the accounting guidance for consolidation of VIEs. Other changes
include additional considerations when determining if sale accounting is
appropriate, as well as enhanced disclosure requirements. The new standard is
to be applied prospectively to transactions completed after the effective
date.



ASU No.
2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by
Enterprises Involved with Variable Interest Entities: An amendment for
accounting by enterprises involved with VIEs eliminates the scope exception
for QSPEs and requires an entity to reconsider its previous consolidation
conclusions reached under the VIE consolidation model, including (i) whether
an entity is a VIE, (ii) whether the enterprise is the VIEs primary
beneficiary, and (iii) the required financial statement disclosures. The new
standard can be applied as of the effective date, with a cumulative-effect
adjustment to retained earnings recognized on that date, or retrospectively,
with a cumulative-effect adjustment to retained earnings recognized as of the
beginning of the first year adjusted.

Note 2 Fair Values

As permitted
under GAAP, Credco adopted new fair value measurement and disclosure
requirements in two phases. The first phase, effective for Credco January 1,
2008, establishes requirements for fair value measurements of financial assets
and liabilities, and other recurring fair value measurements reported or
disclosed at fair value. The second phase, effective for Credco January 1,
2009, establishes requirements for all assets and liabilities recognized or
disclosed at fair value on a nonrecurring basis.

Fair value is
defined as the price that would be received to sell an asset or paid to
transfer a liability (an exit price) in an orderly transaction between market
participants at the measurement date, and is based on Credcos principal or
most advantageous market for the specific asset or liability.

GAAP
established a three-level hierarchy of inputs to valuation techniques used to
measure fair value, defined as follows:

Level 2 
inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly, for substantially
the full term of the asset or liability, including:

-

Quoted
prices for similar assets or liabilities in active markets

-

Quoted
prices for identical or similar assets or liabilities in markets that are not
active

-

Inputs other
than quoted prices that are observable for the asset or liability

-

Inputs that
are derived principally from or corroborated by observable market data by
correlation or other means



Level 3 
inputs that are unobservable and reflect Credcos own assumptions about the
assumptions market participants would use in pricing the asset or liability
based on the best information available in the circumstances (e.g. internally
derived assumptions surrounding the timing and amount of expected cash
flows).

For the year
ended December 31, 2009, Credco did not have any significant assets or
liabilities that were measured at fair value on a nonrecurring basis in periods
subsequent to initial recognition.

The following
table provides a summary of the estimated fair values for Credcos financial
assets and financial liabilities measured at fair value on a recurring basis by
GAAPs valuation hierarchy (as described above), as of December 31:

2009

2008

(Millions)

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Assets

Investment
securities

$



$

2,039

$



$

2,039

$



$

3,084

$



$

3,084

Derivatives(a)



318



318



545



545

Total assets

$



$

2,357

$



$

2,357

$



$

3,629

$



$

3,629

Liabilities

Derivatives(a)

$



$

68

$



$

68

$



$

120

$



$

120

Total
liabilities

$



$

68

$



$

68

$



$

120

$



$

120

(a)

GAAP permits the netting of derivative assets and
derivative liabilities when a legally enforceable master netting agreement
exists between Credco and its derivative counterparty. As of December 31,
2009 and 2008, $2.0 million and $8.0 million, respectively, of derivative
assets and liabilities have been offset and presented net on the Consolidated
Balance Sheets.

Valuation Techniques Used in Measuring Fair
Value

GAAP requires
disclosure of the estimated fair value of all financial instruments. A financial
instrument is defined as cash, evidence of an ownership in an entity, or a
contract between two entities to deliver cash or another financial instrument
or to exchange other financial instruments. The disclosure requirements for the
fair value of financial instruments exclude leases, equity method investments,
affiliate investments, pension and benefit obligations, insurance contracts and
all non-financial instruments.

For the
financial assets and liabilities measured at fair value on a recurring basis,
summarized in the valuation hierarchy table above, Credco applies the following
valuation techniques to measure fair value:

Investment Securities



When
available, quoted market prices in active markets are used to determine fair
value. Such investment securities are classified within Level 1 of the fair
value hierarchy.



When quoted
prices in an active market are not available, the fair values for Credcos
investment securities are obtained primarily from pricing services engaged by
Credco, and Credco receives one price for each security. The fair values
provided by the pricing services are estimated by using pricing models, where
the inputs to those models are based on observable market inputs. The inputs
to the valuation techniques applied by the pricing services are typically
benchmark yields, benchmark security prices, credit spreads,

prepayment
speeds, reported trades and broker-dealer quotes, all with reasonable levels
of transparency. The pricing services did not apply any adjustments to the
pricing models used. In addition, Credco did not apply any adjustments to
prices received from the pricing services. Credco classifies the prices
obtained from the pricing services within Level 2 of the fair value hierarchy
because the underlying inputs are directly observable from active markets or
recent trades of similar securities in inactive markets. The pricing models
used do entail a certain amount of subjectivity and therefore differing
judgments in how the underlying inputs are modeled could result in different
estimates of fair value.

Credco
reaffirms its understanding of the valuation techniques used by its pricing
services at least annually. In addition, Credco corroborates the prices
provided by its pricing services to test their reasonableness by comparing
their prices to valuations from different pricing sources. Refer to Note 4 for
additional fair value information.

Derivative Financial Instruments

The fair value
of Credcos derivative financial instruments, which could be assets or
liabilities on the Consolidated Balance Sheets, is estimated by using either a
third-party valuation service that uses proprietary pricing models, or by using
internal pricing models, neither of which contain a high level of subjectivity
as the valuation techniques used do not require significant judgment and inputs
to those models are readily observable from actively quoted markets. In each
case, the valuation models used are consistently applied and reflect the
contractual terms of the derivatives, including the period of maturity, and
market-based parameters such as interest rates, foreign exchange rates, equity
indices or prices, and volatility.

Credit
valuation adjustments are necessary when the market parameters (for example, a
benchmark curve) used to value derivatives are not indicative of the credit
quality of Credco or its counterparties. Credco considers the counterparty
credit risk by applying an observable forecasted default rate to the current
exposure. Refer to Note 8 for additional fair value information.

The following
table discloses the estimated fair values for Credcos financial assets and
financial liabilities not carried at fair value as of December 31:

(Billions)

2009

2008

Carrying
Value

Fair Value

Carrying
Value

Fair Value

Financial Instrument Assets:

Assets for which carrying values equal or approximate
fair value

$

16

$

16

$

27

$

27

Loans to affiliates

$

10

$

10

$

12

$

12

Financial Instrument Liabilities:

Liabilities for which carrying values equal
or approximate fair value

$

5

$

5

$

16

$

16

Long-term debt

$

19

$

20

$

20

$

18

The fair
values of these financial instruments are estimates based upon market
conditions and perceived risks as of December 31, 2009 and 2008, and require
management judgment. These figures may not be indicative of their future fair
values. The fair value of Credco cannot be estimated by aggregating the amounts
presented.

Financial
assets for which carrying values equal or approximate fair value include cash
and cash equivalents, cardmember receivables, accrued interest, and certain
other assets. For these assets, the carrying values approximate fair value
because they are either short-term in duration, variable rate in nature or
both.

Loans to affiliates are
recorded at historical cost, less reserves, on the Consolidated Balance Sheets.
Fair value is estimated based on either the fair value of the underlying
collateral, or the terms implicit in the loan agreements as compared with
current market terms for similar loans.

Financial liabilities for
which carrying values equal or approximate fair value include short-term debt,
short-term debt to affiliates, accrued interest, and certain other liabilities.
For these liabilities, the
carrying values approximate fair value because these are either short-term in
duration, variable rate in nature, have no defined maturity, or a combination
thereof.

Financial liabilities carried at other than fair value

Long-term
Debt

Long-term debt is recorded
at historical issuance cost on the Consolidated Balance Sheets. Fair value is
estimated using either quoted market prices or discounted cash flows based on
Credcos current borrowing rates for similar types of borrowing.

Note 3 Cardmember Receivables and Loans

The following table presents
the cardmember receivables balances as of December 31:

(Billions)

2009

2008

Cardmember receivables,
gross

$

9,893

$

10,859

Less: Cardmember
receivables reserve for losses

141

204

Cardmember receivables, net

$

9,752

$

10,655

Cardmember receivables
represent amounts due from American Express charge card customers. These
receivables are recorded at the time they are purchased from TRS and certain of
its subsidiaries that issue the card (Card Issuers). Cardmember receivable
balances are presented on the Consolidated Balance Sheets, net of reserves for
losses, and typically include principal and any related accrued fees.
Cardmember receivables also include participation interests purchased from an
affiliate. Participation interests in cardmember receivables represent
undivided interests in the cash flows of the non-interest-bearing cardmember
receivables and are purchased without recourse by Credco Receivables Corporation
(CRC) from American Express Receivables Financing Corporation V LLC (RFC V). As
of December 31, 2009 and 2008, CRC owned approximately $2.9 billion and $2.4
billion, respectively, of participation interests in cardmember receivables
purchased from RFC V.

The following table presents
the cardmember loans balances as of December 31:

Cardmember loans represent
amounts due from customers of American Express and certain of its affiliates lending products. These loans are recorded at the time they
are purchased from TRS and certain of its affiliates. These loans are presented
in the Consolidated Balance Sheets, net of reserves for cardmember losses, and
include accrued interest receivable and fees as of the balance sheet date. Additionally,
cardmember loans include balances with extended payment terms on certain charge
card products, such as Sign & Travel®. Credcos policy
is to cease accruing for interest once a cardmember loan is greater than 180
days past due. Accruals that cease are generally not resumed.

The following table presents
the changes in the reserve for losses related to cardmember receivables and
loans:

Years Ended
December 31, (Millions)

2009

2008

2007

Reserve for losses:

Balance at beginning of
year

$

218

$

841

$

749

Additions:

Provisions for losses

214

641

842

Other credits(b)

12

46

14

Deductions:

Accounts written-off, net(a) (c)

263

1,204

666

Other charges(d)

21

106

98

Balance at end of year

$

160

$

218

$

841

Reserve for losses as a % of gross cardmember receivables and loans
owned at year-end

1.5

%

1.9

%

3.2

%

(a)

Includes recoveries on
accounts previously written-off of $75 million, $144 million and $175
million in 2009, 2008 and 2007, respectively.

(b)

Reserve balances applicable
to new groups of cardmember receivables and loans purchased from TRS and
certain of its subsidiaries and participation interests purchased from
affiliates. New groups of cardmember receivables and loans purchased totaled
$1.8 billion, $1.9 billion and $0.7 billion in 2009, 2008 and 2007,
respectively.

(c)

The net write-offs for 2008
include approximately $257 million resulting from the 180 day write-off
methodology change discussed below.

(d)

Primarily relates to reserve
balances applicable to certain groups of cardmember receivables and
participation interests sold to affiliates. Cardmember receivables and
participation interests sold to affiliates totaled $2.3 billion, $2.0 billion
and $2.1 billion in 2009, 2008 and 2007, respectively.

Credcos reserves for losses
relating to cardmember receivables and loans represent managements best
estimate of the losses inherent in Credcos outstanding portfolio of
receivables and loans. Reserves for cardmember receivables and loans losses are
primarily based upon models that analyze portfolio performance and reflect
managements judgment regarding overall reserve adequacy. The analytic models
take into account several factors, including average losses and recoveries over
an appropriate historical period. Management considers whether to adjust the
analytic models for specific factors such as increased risk in certain
portfolios, impact of risk management initiatives on portfolio performance and
concentration of credit risk based on factors such as tenure, industry or
geographic regions. In addition, management adjusts the reserves for losses for
other external environmental factors including leading economic and market
indicators such as the unemployment rate, Gross Domestic Product (GDP), home
price indices, non-farm payrolls, personal consumption expenditures index,
consumer confidence index, purchasing managers index, bankruptcy filings, and
the legal and regulatory environment. Generally, due to the short-term nature
of cardmember receivables, the impact of the other external environmental
factors on the inherent losses within the cardmember receivable portfolio is
not significant. As part of this evaluation process, management also considers
various reserve coverage metrics, such as reserves as a percentage of past-due
amounts, reserves as a percentage of cardmember receivables and loans, and net
write-off coverage.

Cardmember receivables and
loans are written off when management deems amounts to be uncollectible and
this is generally determined by the number of days past due. Cardmember loans
are generally written-off when 180 days past due. Cardmember receivables are
generally written-off when they are 360 days past billing, apart from
cardmember receivables that are included in American Express U.S. Card
Services segment, which are written-off when they are 180 days past due. Such
receivables are held by Credco Receivables Corporation (CRC). A cardmember is
considered 360 days past billing if payment has not been received within 360
days of the cardmembers billing statement date. A cardmember account becomes
past due if payment is not received within 30 days after the billing statement.
During 2008, consistent with American Express modification of its write-off
methodology due to bank regulatory guidance, Credco modified its write-off
methodology to write off certain cardmember receivables when 180 days past due.
Net cardmember receivables write-offs in 2008

included approximately $257
million resulting from this change in write-off methodology. The impact of this
change to the provision for charge card losses was not material.

Cardmember receivables and
loans in bankruptcy or owed by deceased individuals are written off upon
notification. Recoveries of both cardmember loans and receivables are
recognized on a cash basis.

Note 4 Investment Securities

Investment securities
include debt securities that are classified as available for sale. Credcos
investment securities are carried at fair value on the Consolidated Balance
Sheets with unrealized gains recorded in accumulated other comprehensive (loss)
income, net of income tax provisions (benefits). Realized gains and losses on
investment securities are recognized in Credcos results of operations upon
disposition using the specific identification method on a trade date basis.
Refer to Note 2 for a description of Credcos methodology for determining the
fair value of its investment securities.

The following is a summary
of investment securities as of December 31:

2009

2008

(Millions)

Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value

Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value

U.S. Government agency obligations

$

2,017

$

22

$



$

2,039

$

2,640

$

37

$



$

2,677

U.S. Government treasury obligations









401

6



407

Total

$

2,017

$

22

$



$

2,039

$

3,041

$

43

$



$

3,084

Other-Than-Temporary Impairment

Realized losses are
recognized when management determines that a decline in value is other than
temporary. Such determination requires judgment regarding the amount and timing
of recovery. Credco reviews and evaluates its investments at least quarterly
and more often, as market conditions may require, to identify investments that
have indications of other-than-temporary impairments. The determination of
other-than-temporary impairment is a subjective process, requiring the use of
judgments and assumptions. It is reasonably possible that a change in estimate
will occur in the near term relating to other-than-temporary impairment.
Accordingly, Credco considers several factors when evaluating debt securities
for an other-than-temporary impairment including the determination of the
extent to which the decline in fair value of the security is due to increased
default risk for the specific issuer or market interest rate risk. With respect
to increased default risk, Credco assesses the collectibility of principal and
interest payments by monitoring issuers credit ratings, related changes to those
ratings, specific credit events associated with the individual issuers as well
as the credit ratings of a financial guarantor, where applicable, and the
extent to which amortized cost exceeds fair value and the duration and size of
that difference. With respect to market interest rate risk, including benchmark
interest rates and credit spreads, Credco assesses whether it has the intent to
sell the securities, and whether it is more likely than not that Credco will
not be required to sell the securities before recovery of any unrealized
losses.

As of December 31, 2009 and
2008, there were no investment securities in an unrealized loss position.

Gross realized gains and
losses on the sale of investment securities for the year ended December 31,
2008 were $13 million and $8 million, respectively. For the years ended
December 31, 2009 and 2007, Credco did not have any sales of investment
securities and therefore had no gross realized gains or losses thereon.

All available-for-sale
investment securities held as of December 31, 2009 will mature in 2010.

Note 5 Short-Term Debt

Credcos short-term
borrowings outstanding, defined as borrowings with original maturities of less
than one year, were as follows as of December 31:

(Millions)

2009

2008

Outstanding
Balance

Year-End Stated
Rate on Debt (a)

Outstanding
Balance

Year-End Stated
Rate on Debt (a)

Commercial paper(b)

$

975

0.19

%

$

7,272

2.20

%

Bank notes payable

42

2.81

%

95

0.32

%

Total

$

1,017

0.30

%

$

7,367

2.18

%

(a)

For floating rate debt issuances,
the stated interest rates are based on the floating rates in effect as of
December 31, 2009 and 2008, respectively. These rates may not be an
indication of future interest rates.

(b)

Balance as of December 31,
2008 includes $4.5 billion of commercial paper purchased by the Federal
Reserve Banks Special Purpose Vehicle (SPV) through the Commercial Paper
Funding Facility (CPFF). As of December 31, 2009, no commercial paper
purchased by the SPV was outstanding.

Credco paid interest on
short-term debt, including interest paid on short-term debt to affiliates,
obligations and corresponding interest rate swaps of $63 million, $649 million
and $836 million for the years ended December 31, 2009, 2008 and 2007,
respectively. Refer to Note 10 for more details on short-term debt to
affiliates.

Credcos
long-term debt outstanding, defined as debt with original maturities of one
year or greater, as of December 31, was as follows:

(Millions)

2009

2008

Maturity
Dates

Outstanding
Balance(a)

Year-End
Stated Rate
on Debt(b)

Year-End
Effective
Interest
Rate with
Swaps(b)(c)

Outstanding
Balance(a)

Year-
End
Stated
Rate on
Debt(b)

Year-End
Effective
Interest
Rate with
Swaps(b)(c)

Fixed Rate Senior Notes(d)

2010-2015

$

11,485

5.58

%

3.26

%

$

9,697

5.60

%

3.64

%

Floating Rate Senior Notes(d)

2011-2013

4,761

1.30

%



7,807

1.77

%

2.85

%

Borrowings under Bank Credit Facilities

2012

3,232

4.23

%

4.52

%

2,506

4.56

%

4.88

%

Total

$

19,478

4.29

%

$

20,010

3.94

%

(a)

The outstanding balances
reflect the impact of fair value hedge accounting whereby certain fixed rate
notes have been swapped to floating rate through the use of interest swaps
and are marked to fair value, as are the associated swaps which are reported
as derivative assets or liabilities. In 2009 and 2008, the impact on the
long-term debt outstanding balance due to fair value hedge accounting was
$265 million and $410 million, respectively. Refer to Note 8 for more details
on Credcos treatment of fair value hedges.

(b)

For floating rate debt
issuances, the stated and effective interest rates are based on the floating
rates in effect as of December 31, 2009 and 2008, respectively. These rates
are not indicative of future interest rates.

(c)

Effective interest rates are
only presented when swaps are in place to hedge the underlying debt.

(d)

As of December 31, 2009 and
2008, Credcos outstanding debt includes $7 million and $14 million,
respectively, of long-term notes held by an affiliate.

Aggregate
annual maturities of long-term debt obligations (based on final maturity dates)
were as follows as of December 31, 2009 (millions):

Credco
maintained bank lines of credit of $11.4 billion and $10.4 billion at December
31, 2009 and 2008, respectively. Of these amounts, $8.2 billion and $7.9
billion remained available for use to Credco as of December 31, 2009 and 2008,
respectively, and are available to support commercial paper borrowings.
American Express Company has the right, at both periods, to draw up to $1.3
billion on these undrawn lines of credit, which would result in a corresponding
reduction of the amount available to Credco. The drawn amounts under these bank
lines are classified as long-term debt on the accompanying Consolidated Balance
Sheets. Credco paid $5.8 million and $5.0 million in fees to maintain these
lines for the years ended December 31, 2009 and 2008, respectively.

The
availability of these credit lines is subject to compliance with certain
financial covenants, including the maintenance of a 1.25 ratio of combined
earnings and fixed charges to fixed charges. As of December 31, 2009, Credcos
ratio of combined earnings and fixed charges to fixed charges was 1.59.

The committed
bank credit facilities do not contain material adverse change clauses and the
facilities may not be terminated should there be a change in credit ratings.

As of December
31, 2009 and 2008, Credco was not in violation of any of its debt covenants.

Note 7 Restrictions
as to Dividends and Limitations on Indebtedness

The most restrictive
limitation on dividends imposed by the debt instruments issued by Credco is the
requirement that Credco maintain a minimum consolidated net worth of $50.0
million. There are no limitations on the amount of debt that can be issued by
Credco.

General
principles and the overall framework for managing market risk across American
Express and its subsidiaries, including Credco, are defined in the Market Risk
Policy, which is the responsibility of the Asset-Liability Committee (ALCO).
Market risk limits and escalation triggers in that policy are approved by the
ALCO and by the Enterprise-wide Risk Management Committee (ERMC). Market risk
is centrally managed by the Market Risk Committee, which reports into the ALCO
and is chaired by the Chief Market Risk Officer of American Express. Market
risk management is also guided by policies covering the use of derivative financial
instruments, funding and liquidity and investments. Derivative financial
instruments derive their value from an underlying variable or multiple
variables, including interest rate, foreign exchange, and equity indices or
prices. These instruments enable end users to increase, reduce or alter
exposure to various market risks and, for that reason, are an integral
component of Credcos market risk management and related asset-liability
management strategy and processes. Credco uses derivatives to manage these
exposures that arise within its business operations, but does not engage in
derivative financial instruments for trading purposes.

Interest rate
exposure within Credcos charge card and fixed-rate lending products is managed
by varying the proportion of total funding provided by short-term and
variable-rate debt compared to fixed-rate debt. In addition, interest rate
swaps are used to effectively convert fixed-rate debt to variable or to convert
variable-rate debt to fixed-rate. Credco may change the mix between
variable-rate and fixed-rate funding based on changes in business volumes and
mix, among other factors.

Foreign
exchange risk is generated by funding foreign currency cardmember receivables
and loans in U.S. dollars, foreign subsidiary equity and foreign currency
earnings in international units. Credco hedges this market exposure through
various means to the extent it is economically justified, including foreign
currency funding and the use of derivative financial instruments such as
foreign exchange forwards and cross-currency swap contracts, which can help
lock-in the value of Credcos exposure to specific currencies.

Derivative
financial instruments may contain counterparty credit risk. Credco manages this
risk by considering the current exposure, which is the replacement cost of
contracts on the measurement date, as well as estimating the maximum potential
value of the contracts over the next 12 months, considering such factors as the
volatility of the underlying or reference index. To mitigate derivative credit
risk, counterparties are required to be pre-approved and rated as investment
grade. Counterparty risk exposures are monitored by American Express Institutional
Risk Management Committee (IRMC). The IRMC formally reviews large institutional
exposures to ensure compliance with American Express ERMC guidelines and
procedures and determines the risk mitigation actions, when necessary.
Additionally, to mitigate counterparty credit risk, Credco may, on occasion,
enter into master netting agreements.

As of December
31, 2009 and 2008, the counterparty credit risk associated with Credcos
derivative financial instruments was not significant. In relation to Credcos
credit risk, under the terms of its derivative financial instruments, Credco is
not required to either immediately settle any outstanding liability balances,
or post collateral upon the occurrence of a specified credit risk-related
event.

Credcos derivative
financial instruments are carried at fair value on the Consolidated Balance
Sheets. The accounting for changes in fair value depends on the instruments
intended use and the resulting hedge designation, if any, as discussed below.
Refer to Note 2 for a description of Credcos methodology for determining
the fair value of its derivative financial instruments.

The following
table summarizes the total gross fair value, excluding interest accruals, of
derivative product assets and liabilities as of December 31:

Other assets
Fair Value

Other liabilities
Fair Value

(Millions)

2009

2008

2009

2008

Derivatives designated as hedging
instruments

Interest rate contracts

Fair value hedges

$

293

$

431

$

6

$



Cash flow hedges

1



5

54

Foreign exchange contracts

Net investment hedges

9

39

7

22

Total derivatives designated as hedging
instruments

$

303

$

470

$

18

$

76

Derivatives not designated as hedging
instruments

Interest rate contracts

$



$



$

5

$

5

Foreign exchange contracts

15

75

45

39

Total derivatives not designated as hedging
instruments

15

75

50

44

Total derivatives(a)

$

318

$

545

$

68

$

120

(a)

GAAP permits the netting of
derivative assets and derivative liabilities when a legally enforceable
master netting agreement exists between Credco and its derivative
counterparty. As of December 31, 2009 and 2008, $2.0 million and $8.0
million, respectively, of derivative assets and liabilities have been offset
and presented net on the Consolidated Balance Sheets.

Derivative Financial Instruments that Qualify for
Hedge Accounting

Derivative financial
instruments executed for hedge accounting purposes are documented and
designated as such when Credco enters into the contracts. In accordance with
its risk management policies, Credco structures its hedges with very similar
terms to the hedged items. Credco formally assesses, at inception of the hedge
accounting relationship and on a quarterly basis, whether derivatives
designated as hedges are highly effective in offsetting the fair value or cash
flows of hedged items. These assessments usually are made through the
application of the regression analysis method. If it is determined that a
derivative is not highly effective as a hedge, Credco will discontinue the
application of hedge accounting.

A fair value hedge
involves a derivative designated to hedge Credcos exposure to future changes
in the fair value of an asset or a liability, or an identified portion thereof
that is attributable to a particular risk. Credco is exposed to interest rate
risk associated with its fixed-rate long-term debt. Credco uses interest rate
swaps to convert certain fixed-rate long-term debt to floating-rate at the time
of issuance. As of December 31, 2009 and 2008, Credco hedged $7.5 billion and
$4.8 billion, respectively, of its fixed-rate debt to floating-rate debt using
interest rate swaps.

To the extent the fair value
hedge is effective, the gain or loss on the hedging instrument offsets the loss
or gain on the hedged item attributable to the hedged risk. Any difference
between the changes in the fair value of the derivative and the hedged item is
referred to as hedge ineffectiveness and is recorded in earnings as a component
of other revenues. Hedge ineffectiveness may be caused by differences between
the debts interest coupon and the benchmark rate, which is in turn primarily
due to credit spreads at inception of the hedging relationship that are not
reflected in the valuation of the interest rate swap. Furthermore, hedge
ineffectiveness may be caused by changes in the relationship between 3-month
LIBOR and 1-month LIBOR rates, as these so-called basis spreads may impact the
valuation of the interest rate swap without causing an offsetting impact in the
value of the hedged debt. If a fair value hedge is de-designated or no longer
considered to be effective, changes in fair value of the derivative continue to
be recorded through earnings but the hedged asset or liability is no longer
adjusted for changes in fair value. The existing basis adjustment of the hedged
asset or liability is then amortized or accreted as an adjustment to yield over
the remaining life of that asset or liability.

The following table
summarizes the impact on the Consolidated Financial Statements of fair value
hedges associated with Credcos fixed-rate long-term debt described above for
the years ended December 31:

Derivative contract (loss) gain

Hedged item gain (loss)

(Millions)

Amount

Amount

Ineffective net
gains (losses)

Derivative
relationship

Location

2009

2008

Location

2009

2008

2009

2008

Interest
rate contracts

Other revenues

$

(144

)

$

401

Other revenues

$

146

$

(381

)

$

2

$

20

Cash Flow Hedges

A cash flow hedge involves a
derivative financial instrument designated to hedge Credcos exposure to
variable future cash flows attributable to a particular risk of an existing
recognized asset or liability, or a forecasted transaction. Credco hedges
existing long-term variable-rate debt, the rollover of short-term borrowings
and the anticipated forecasted issuance of additional funding through the use
of derivative financial instruments, primarily interest rate swaps. These
instruments effectively convert floating-rate debt to fixed-rate debt for the
duration of the swap. As of December 31, 2009 and 2008, Credco hedged $0.6
billion and $2.7 billion, respectively, of its floating debt using interest
rate swaps.

For derivatives that qualify
as cash flow hedges, the effective portion of the gain or loss on the
derivatives are recorded in accumulated other comprehensive (loss) income and
reclassified into earnings when the hedged cash flows are recognized in
earnings. The amount that is reclassified into earnings is presented in the
Consolidated Statements of Income with the hedged instrument or transaction
impact, primarily in interest expense. Any ineffective portion of the gain or
loss on the derivatives is reported as a component of other revenues. If a cash
flow hedge is de-designated or terminated prior to maturity, the amount
previously recorded in accumulated other comprehensive (loss) income is
recognized into earnings over the period that the hedged item impacts earnings.
If a hedge relationship is discontinued because it is probable that the
forecasted transaction will not occur according to the original strategy, any
related amounts previously recorded in accumulated other comprehensive (loss)
income are recognized into earnings immediately.

In the normal course of
business, as the hedged cash flows are recognized into earnings, Credco expects
to reclassify $3 million of net pretax losses on derivative instruments from
accumulated other comprehensive (loss) income into earnings during the next 12
months.

The following table
summarizes the impact on the Consolidated Financial Statements of cash flow hedges
for the years ended December 31:

Derivative impact on statement of income (loss) gain

Derivative ineffectiveness (loss) gain

(Millions)

Location Reclassified from
AOCI
into Income

Amount Reclassified from
AOCI
into Income

Location Reclassified from
AOCI
into Income

Amount

Derivative relationship

2009

2008

2009

2008

Cash flow hedges (a)(b):

Interest rate contracts

Interest expense

$

(60

)

$

(111

)

Other
revenues

$



$



(a)

As of December 31, 2009 and
2008, there was no impact in the Consolidated Statements of Income due to
forecasted transactions no longer probable to occur.

(b)

The effective portion of
the gain or loss on the derivatives is recorded in accumulated other
comprehensive (loss) income (AOCI).

Net Investment Hedges

A net investment hedge is
used to hedge future changes in currency exposure of a net investment in a
foreign operation. Credco primarily designates foreign currency derivatives,
typically foreign exchange forwards, and on occasion foreign currency
denominated debt, as hedges of net investments in certain foreign operations.
These instruments reduce exposure to changes in currency exchange rates on
Credcos investments in non-U.S. subsidiaries. The effective portion of the
gain or loss on net investment hedges are recorded in accumulated other
comprehensive (loss) income as part of the cumulative translation adjustment.
Any ineffective portion of the gain or loss on net investment hedges is
recognized in other revenues during the period of change. Credco did not
recognize any ineffectiveness gain (loss) in income or reclass any amounts,
related to its net investment hedges, from accumulated other comprehensive income
into income for the years ended December 31, 2009 and 2008.

Derivatives Not Designated as Hedges

Credco has derivative
financial instruments that act as economic hedges and are not designated for
hedge accounting purposes. Foreign currency transactions and non-U.S. dollar
cash flow exposures from time to time may be partially or fully economically
hedged through foreign currency contracts, primarily foreign exchange forwards,
options, and cross-currency swaps. These hedges generally mature within one
year. Foreign currency contracts involve the purchase and sale of a designated
currency at an agreed upon rate for settlement on a specified date. The changes
in the fair value of the derivatives effectively offset the related foreign
exchange gains or losses on the underlying balance sheet exposures.

For derivative financial
instruments that are not designated as hedges, changes in fair value are
reported in current period earnings.

The following table
summarizes the impact on the Consolidated Financial Statements of derivative
financial instruments not designated as hedges for the years ended December 31:

(Millions)

Income Statement
classification of gain (loss)
on
derivatives not designated
as hedges

Amount recognized

Derivative relationship

2009

2008

Derivatives not designated as hedges

Interest rate
contracts

Other revenues

$



$

(1

)

Foreign exchange
contracts

Other revenues

(9

)

(40

)

Foreign exchange
contracts

Interest expense

39

20

Total

$

30

$

(21

)

Note 9 Variable Interest Entities

Credco established a
variable interest entity (American Express Canada Credit Corporation, AECCC)
used primarily to loan funds to affiliates. Credco holds a shelf registration
in Canada for a medium-term program providing for the issuance of notes by AECCC.
All notes issued under this program are fully guaranteed by Credco. These
medium-term issuances are the primary source of financing loans to affiliates.
Credco is considered the primary beneficiary of the entity and owns all of the
outstanding voting interests and therefore, consolidates the entity in
accordance with accounting guidance governing consolidation of variable
interest entities. Total assets as of December 31, 2009 and 2008 were $2.3
billion and $2.0 billion, respectively, and are recorded in loans to
affiliates. Total liabilities as of December 31, 2009 and 2008 were $2.2
billion and $1.9 billion, respectively, and are recorded in long-term debt.

Note 10 Transactions with Affiliates

In 2009, 2008 and 2007,
Credco purchased cardmember receivables and loans without recourse from TRS and
certain of its subsidiaries totaling approximately $120 billion, $244
billion and $294 billion, respectively. In 2009, 2008 and 2007, Credco sold
cardmember receivables and participating interests to affiliates totaling $2.3
billion, $2.0 billion and $2.1 billion, respectively. The receivables
agreements require TRS and other Card Issuers, at their expense, to perform
accounting, clerical and other services necessary to bill and collect all
cardmember receivables and loans owned by Credco. Since settlements under the
agreements occur monthly, an amount due from, or payable to, such affiliates
may arise at the end of each month.

As of December 31, 2009 and
2008, CRC owned approximately $2.9 billion and $2.4 billion, respectively, of
participation interests purchased from RFC V.

Other transactions with
American Express and its subsidiaries as of and for the years ended December 31
were as follows:

(Millions)

2009

2008

2007

Cash and cash equivalents
maintained with affiliates

$



$



$

4

Maximum month-end level of
cash and cash equivalents during the year



2

9

Loans to affiliates

10,127

11,726

11,201

Average interest rate on
loans to affiliates

4.29

%

6.36

%

6.38

%

Due from affiliates

4,924

3,660

2,469

Maximum month-end level of
loans to affiliates during the year

11,718

14,046

11,346

Short-term debt to
affiliates

3,893

8,317

8,682

Average interest rate on
short-term debt to affiliates

0.48

%

1.05

%

4.83

%

Maximum month-end level of
borrowings during the year

14,662

12,583

10,139

Interest income from
affiliates

432

744

650

Other income from
affiliates

7

8

8

Interest paid to
affiliates

48

280

436

Interest expense to
affiliates

41

255

434

Service fees to affiliates(a)

1

173

192

(a)

Fees paid to affiliates for
related servicing of receivables purchased.

Credcos loans to affiliates
represent fixed and floating rate interest-bearing intercompany borrowings by
other wholly-owned TRS subsidiaries and American Express. Revenue earned from
cardmember receivables with recourse and cardmember receivables and loans
funded by loans to affiliates is recorded as interest income from affiliates in
the Consolidated Statements of Income. As of December 31, 2009, no significant
amount of loss reserves has been recorded and no loans are 30 days or more past
due.

Components of loans to
affiliates as of December 31 were as follows:

(Millions)

2009

2008

TRS Subsidiaries:

American Express Australia Limited

$

3,687

$

3,204

Amex Bank of Canada

2,728

2,257

American Express Services Europe Limited

2,710

2,388

American Express Co. (Mexico) S.A. de C.V.

432

392

American Express Bank (Mexico) S.A.

349

317

American Express International, Inc.

221

943

American Express Centurion Bank



2,225

Total(a)

$

10,127

$

11,726

(a)

As of December 31, 2009,
Credco had $10.1 billion of outstanding loans to affiliates, of which
approximately $6.8 billion are collateralized by the underlying cardmember
receivables transferred with recourse and the remaining $3.3 billion are
uncollateralized loans primarily with affiliated banks. As of December 31,
2008, Credco had $11.7 billion of outstanding loans to affiliates, of which
approximately $6.0 billion are collateralized by the underlying cardmember
receivables transferred with recourse and the remaining $5.7 billion are
uncollateralized loans primarily with affiliated banks.

Due from affiliates relate
primarily to a timing difference resulting from the purchase of cardmember
receivables net of remittances from TRS, as well as from operating activities.

Components of short-term
debt to affiliates as of December 31 were as follows:

(Millions)

2009

2008

AE Exposure Management Ltd.

$

2,087

$

2,356

American Express

948

3,579

American Express Holdings (Netherlands) C.V.

294

417

American Express Europe Limited

150

175

National Express Company, Inc.

142

91

American Express Publishing
Corp.

55

84

TRS



1,483

Other

217

132

Total

$

3,893

$

8,317

Short-term debt to
affiliates consists primarily of master note agreements for which there is no
stated term. Credco does not expect any changes to its short-term funding strategies
with affiliates.

The above transactions were
based on negotiated pricing between Credco and its related parties and this
pricing is intended to but may not approximate market terms, even though
comparable market pricing for unrelated parties may not be readily available in
all circumstances.

Service Fees to Affiliates

Credco is charged a servicing fee by certain affiliates (primarily the Banks)
for the servicing of receivables purchased. Credco recognizes the servicing fees
it incurs in service fees to affiliates in its Consolidated Statements of
Income. Servicing fees of $1 million and $173 million were incurred for 2009 and
2008, respectively, of which the 2008 servicing fees primarily related to the
agreement with the Banks. Due to the amendment of the receivables agreements in
2008, Credco did not purchase any receivables from the Banks during 2009.
Certain other affiliates do not explicitly charge Credco a servicing fee for the
servicing of receivables purchased. Instead Credco receives a lower discount
rate on the receivables sold to Credco than would be the case if servicing fees
were charged explicitly, as the discount rate on receivables purchased by Credco
is adjusted to generate income for Credco that is sufficient to maintain its
minimum fixed charge coverage ratio. If a servicing fee were charged by these
other affiliates from which Credco purchases receivables, servicing fees to
affiliates would have been higher by approximately $126 million and $152 million
for the years ended December 31, 2009 and 2008, respectively. Correspondingly,
discount revenue would have increased by approximately the same amounts in those
years.

As of December 31, 2009,
Credcos most significant concentration of credit risk was primarily with
cardmember receivables and loans. Credco purchased cardmember
receivables and loans from TRS and certain of its subsidiaries. TRS considers, on behalf of Credco, credit
performance by customer tenure, industry and geographic location in managing
credit exposure.

Accumulated other
comprehensive (loss) income (AOCI) is a balance sheet item in the Shareholders
Equity section of Credcos Consolidated Balance Sheets. It is comprised of
items that have not been recognized in earnings but may be recognized in
earnings in the future when certain events occur. Changes in each component of
AOCI for the three years ended December 31 were as follows:

Three Years Ended December 31,(Millions), net of tax

Net
Unrealized
Gains on
Investment
Securities

Net
Unrealized
Gains
(Losses) on
Derivatives

Foreign
Currency
Translation
Adjustments

Postretirement
Benefit
Adjustment

Accumulated
Other
Comprehensive
Income (Loss)

Balances
as of December 31, 2006

$

5

$

10

$

42

$

(2

)

$

55

Net unrealized
gains (losses)

23

(26

)





(3

)

Reclassification
for realized (gains) losses into earnings



(14

)





(14

)

Foreign currency
translation adjustments





123



123

Net losses
related to hedges of investment in foreign operations





(43

)



(43

)

Postretirement
benefit adjustment







2

2

Net change in
accumulated other comprehensive (loss) income

23

(40

)

80

2

65

Balances
as of December 31, 2007

$

28

$

(30

)

$

122

$



$

120

Net unrealized
gains (losses)

3

(77

)





(74

)

Reclassification
for realized (gains) losses into earnings

(3

)

72





69

Foreign currency
translation adjustments





(876

)



(876

)

Net gains related
to hedges of investment in foreign operations





186



186

Net change in
accumulated other comprehensive income (loss)



(5

)

(690

)



(695

)

Balances
as of December 31, 2008

$

28

$

(35

)

$

(568

)

$



$

(575

)

Net unrealized
gains (losses)

(14

)

(7

)





(21

)

Reclassification
for realized (gains) losses into earnings



39





39

Foreign currency
translation adjustments





507



507

Net losses
related to hedges of investment in foreign operations





(139

)



(139

)

Net change in
accumulated other comprehensive income (loss)

(14

)

32

368



386

Balances
as of December 31, 2009

$

14

$

(3

)

$

(200

)

$



$

(189

)

(a)

The
following table shows the tax impact for the three years ended December 31,
for the changes in each component of accumulated other comprehensive income
(loss):

The taxable income of Credco
is included in the consolidated U.S. federal income tax return of American
Express. Under an agreement with TRS, taxes are recognized on a separate
company basis. If income tax benefits for net operating losses, future tax
deductions and foreign tax credits cannot be recognized on a separate company
basis, such benefits are then recognized based upon a share, derived by formula,
of those deductions and credits that are recognizable on a TRS consolidated
reporting basis.

The components of income tax
expense included in Credcos Consolidated Statements of Income and
Shareholders Equity were as follows:

(Millions)

2009

2008

2007

Current income tax
(benefit) expense:

U.S. federal

$

(48

)

$

(148

)

$

84

U.S. state & local

26

13

1

Non-U.S.

13

55

21

Total current income tax (benefit) expense

(9

)

(80

)

106

Deferred income tax
expense (benefit):

U.S. federal

12

217

(46

)

Non-U.S.

5

(5

)



Total deferred income tax expense (benefit)

17

212

(46

)

Total income tax expense

$

8

$

132

$

60

A reconciliation of the U.S.
federal statutory rate of 35 percent to Credcos actual income tax rate for the
years ended December 31 was as follows:

(Millions)

2009

2008

2007

Combined tax at U.S.
statutory federal income tax rate

35.0

%

35.0

%

35.0

%

Increase (decrease) in
taxes resulting from:

State and Local income taxes

4.6

0.9



Non-U.S. subsidiaries earnings

(37.4

)

(22.6

)

(27.4

)

Actual tax rates

2.2

%

13.3

%

7.6

%

Credco records a deferred
income tax (benefit) provision when there are differences between assets and
liabilities measured for financial reporting and for income tax return
purposes. These temporary differences result in taxable or deductible amounts
in future years and are measured using the enacted tax rates and laws that will
be in effect when such differences are expected to reverse. A valuation
allowance is established when management determines that it is more likely than
not that all or some portion of the benefit of the deferred tax assets will not
be realized.

The significant components
of deferred tax assets and liabilities as of December 31 are reflected in the
following table:

(Millions)

2009

2008

Deferred tax assets:

Reserves not yet deducted for tax purposes

$

11

$

36

Unremitted foreign earnings

25

26

Net unrealized derivatives losses

2

19

Foreign currency translation adjustments



13

State income taxes

22

13

Other

1

1

Gross deferred tax assets

61

108

Deferred tax liabilities:

Net unrealized securities gains

8

15

Gross deferred tax liabilities

8

15

Net deferred tax assets

$

53

$

93

Accumulated earnings of
certain non-U.S. subsidiaries, which totaled approximately $2.9 billion as of
December 31, 2009, are intended to be permanently reinvested outside the United
States. Credco does not provide for federal income taxes on foreign earnings
intended to be permanently reinvested outside the United States. Accordingly,
federal taxes, which would have aggregated approximately $1.0 billion, have not
been provided on those earnings.

American Express is subject
to the income tax laws of the United States, its states and municipalities and
those of the foreign jurisdictions in which American Express operates. These
tax laws are complex, and the manner in which they apply to the taxpayers
facts is sometimes open to interpretation. Given these inherent complexities,
Credco must make judgments in assessing the likelihood that a tax position will
be sustained upon examination by the taxing authorities based on the technical
merits of the tax position. A tax position is recognized only when, based on
managements judgment regarding the application of income tax laws, it is more
likely than not that the tax position will be sustained upon examination. The
amount of benefit recognized for financial reporting purposes is based on
managements best judgment of the most likely outcome resulting from
examination given the facts, circumstances and information available at the
reporting date. Credco adjusts the level of unrecognized tax benefits when
there is new information available to assess the likelihood of the outcome.
Interest and penalties relating to unrecognized tax benefits are reported in
the income tax provision.

American Express is under
continuous examination by the Internal Revenue Service (IRS) and tax authorities
in other countries and states in which American Express has significant
business operations. The tax years under examination and open for examination
vary by jurisdiction. In June 2008, the IRS completed its field examination of
the American Express federal tax returns for the years 1997 through 2002. In
July 2009, the IRS completed its field examination of American Express federal
tax returns for the years 2003 and 2004. However, all of these years continue
to remain open as a consequence of certain issues under appeal. American
Express is currently under examination by the IRS for the years 2005 and 2007.

Credco routinely assesses
the likelihood of additional assessments in each of the taxing jurisdictions
and has established a liability for unrecognized tax benefits that Credcos
management believes to be adequate. Once established, unrecognized tax benefits
are adjusted if more accurate information is available, or a change in
circumstance, or an event occurs necessitating a change to the liability.
Credco believes that it is reasonably possible that the unrecognized tax
benefit will significantly increase or decrease within the next twelve months.
Due to the inherent complexities and the number of tax years open for
examination in multiple jurisdictions, it is not possible to quantify the
impact such changes may have on the effective tax rate and net income.

The following table presents
changes in the unrecognized tax benefits:

(Millions)

2009

2008

2007

Balance, January 1

$

63

$

55

$

44

Increases for tax positions related to the current year

6

2

10

Increases for tax positions related to prior years

37

8

1

Decrease for tax positions related to prior years

(5

)

(2

)



Settlements with tax authorities

(1

)





Balance, December 31

$

100

$

63

$

55

Included in the $100
million, $63 million and $55 million of unrecognized tax benefits as of
December 31, 2009, 2008 and 2007, respectively, are approximately $85 million,
$53 million and $49 million, respectively that, if recognized, would favorably
affect the effective tax rate in a future period. These benefits primarily
relate to Credcos gross permanent benefits and corresponding foreign tax
credits and federal tax effects.

Interest and penalties
relating to unrecognized tax benefits are reported in the income tax provision.
During the years ended December 31, 2009, 2008 and 2007, Credco recognized
approximately $11 million, $6 million and $2 million, respectively of interest
and penalties. Credco has approximately $27 million and $16 million accrued for
the payment of interest and penalties as of December 31, 2009 and 2008,
respectively.

Current federal taxes due
to/from affiliates included current federal taxes receivable from TRS of $17
million as of December 31, 2009, and current federal taxes receivable of $108
million as of December 31, 2008.

Income taxes refunded to
Credco during 2009 and 2008, including taxes refunded by TRS, were $104 million
and $4 million, respectively. Income taxes paid by Credco during 2007,
including taxes paid to TRS was $140 million. This amount includes estimated
tax payments and cash settlements relating to prior tax years.

Note 14 Geographic Regions

GAAP governing the disclosures
about segments of an enterprise and related information requires public
companies to report certain financial information about significant
revenue-producing segments of the business for which such information is
available and utilized by the chief operating decision maker. Credco is
principally engaged in the business of financing the cardmember receivables and
loans of its affiliates. Management makes operating decisions and assesses
performance based on an ongoing review of these financing activities which
constitute Credcos only operating segment for financial reporting purposes.